2Funding Inspiration Introduction A2FNW - Funding Options NatWest - Bank FinanceThe North West Fund OverviewThe North West Fund for Business LoansThe North West Fund for Development CapitalEntrepreneur - filmSUPPORTED BY2
13Debt Pros (typically) Cons No surrender of shares Known repayments and repayment periodQuicker, simpler to arrangeDebts are tax deductibleConsEvidence of repayment abilityPersonal and business security requiredCan be inflexibleTerms, conditions and covenantsRisk of becoming over geared
14Equity Pros (typically) Cons Equity is risk money. Appropriate at start-up stage through to maturityEquity investors can often provide valuable expertise and contactsAllows flexibility to step change a businessConsHigh growth businesses only that can provide the investor with a returnInvestors require a percentage shareholding in return for cashInvestors may require decision making authorityLengthy process with extensive due diligenceLegal and professional feesMezzanine
16Alternative Finance Options Small Business Loans £3,000 to £50,000Merseyside Special Investment FundThe North West Fund£50,000 - £250,00 loanup to £2 million equityThe Social Enterprise Loan Fund - up to £250,000NW Business Angels £10,000 to £500,000Enterprise Finance Guarantee Scheme £1,000 to £1millionRegional Growth FundLocal initiativesRural Development ProgrammeCoalfields FundTechnology Strategy Boardetc, etc ...Alternative Finance Options
17North West Business Angels www.nwbusinessangels.co.uk
20Access To Finance – What We Do ‘Matching Businesses with Finance’ Ensure viable Northwest based SME’s are investment readySupport the process of obtaining appropriate fundingUNIQUE SELLING PONTS:ImpartialIndependentCredible/Experienced/Knowledgable TeamComplimentaryFree to use
21Access To Finance – How We Do It Review financial performanceDiscuss business plan & forecastsResearch finance products & providersInstigate introductionsSupport investment process
25Turbulent Times ‘There is an increased emphasis on accurate cash forecasting in a “cash burn”environment, and encouragementfor imaginative solutions’Cash Management Spring 2011A supplement to The TreasurerPrincipal Sponsor RBS Group
26External Risks Raw Material Costs Risk of Bad debts Exchange Rate Risk Increasing OverheadsNew legislation
27Are we funding Asset Purchases and Working Capital in the right way Are we funding Asset Purchases and Working Capital in the right way? (at the right time?)
29EFG SchemeSummary Initiative supported by the Government Businesses with turnover less than £25M Where there is no other security available to the bank and all other funding options have been explored Min loan £1K – 1M. Term max 10 years Purpose ~ funding expansion , working capital or equipment
30NatWest Manufacturing Fund Designed to support businesses in the manufacturing sector, this initiative is supported by up to £1bn of funds. The fund should be used alongside the existing options of traditional finance, including Lombard and Invoice Finance, to ensure that we provide the best funding structure for our customers which can be accessed on a variable rate or at specially agreed fixed rates.Purpose of LoanLoans can be used virtually any purpose and include :Business acquisitionsGeneral capital expenditureWorking Capital
31Features Minimum Fixed Rate Loan amount £100,000, maximum £25m Fixed Rates (3 or 5 year fixture periods) are available; terms must match the fixed rate periodsFixed Rate Loans are provided on an interest-only basis during the 1st 2 years of a fixed rate period.Regular capital repayments may be made from the 3rd year of the facility. Such repayment programmes must be agreed at the outset of the loan, & whilst payments may be amortised over longer periods, the commitment will only be for the initial 3 or 5 years.Loans must be drawn as a single advance; it is not possible to draw the loan in stages.
32Bringing Back the Cash ‘Trading Internationally brings new sources of customers & revenues.However, it also brings specificFinancial risks that needTo be controlled’Cash Management Spring 2011A supplement to The TreasurerPrincipal Sponsor RBS Group
33Letter of CreditCan better use be made of Letters of credit to deliver better terms of supply and payment?
34Capital Import Finance Scheme Developed with support of Lombard and RBS Global Transaction Services to create a one stop funding package to acquire Plant and Machinery from abroadStep 1 ~ After you have selected supplier of equipment Lombard issues a formal conditional offer to finance the equipment through an asset finance facility. Offer valid for 270 days to allow asset to be built , shipped and commissionedStep 2 ~GTS tailor short term trade finance facility (LoC structure / Import Loan)Step 3 ~ Once machinery imported Lombard uses agreed asset finance facility to repay GTS.
35BenefitsWorking with GTS the importer, be assured of supplier payment, may have opportunity to negotiate improved termsGTS can help protect the interests of the importer ensuring payments are only released when contractual obligations are metAsset Finance agreed upfront is bridged by a LC structure rather than cash being paid out upfrontPayment structure matched to customer needs and help manage budgets with some certaintyEnd to end solution
36546K Manufacturing Fund Loan 382K Capital Import Finance Undisclosed2.3M Funding Package546K Manufacturing Fund LoanKnowsley based Manufacturer became the first North West business to benefit from the Manufacturing FundThe Specialist manufacturer needed the funding to help cover the costs of orders worth £2MIt secured 546K loan from the Manufacturing Fund as part of £2.3M finance package which also included finding via the EFG scheme and Invoice FinanceUndisclosed382K Capital Import FinanceLombard agreed to finance new manufacturing Line against irrevocable deferred import Letter of creditPayment against agreed milestones and sight of commissioning certificateAt final maturity date Lombard draw agreed 288K under lease agreement. Balance 94K paid by bank customer
37National Loan Guarantee Scheme Access more affordable Business Finance with the National Loan Guarantee Scheme.What is NLGS ?The National Loan Guarantee Scheme (NLGS) was launched in the 2012 budget and is a Government backed bond guarantee scheme.By participating in NLGS banks will offer an equivalent benefit of 100bp to customers who have turnover less than £50M and are within their State Aid limits.Who is the NLGS for ?NLGS is for UK Mid Corporate and SME customers who have a turnover of less than £50M and are seen to be making a material contribution to UK economic activity.Eligibility can include branches of foreign companies with genuine businesses in the UK.Who is participating ?Scheme is available through NatWest Commercial and Business Banking and Lombard.
38NatWest Funds Manufacturing Fund £1B UK Capital Expenditure Fund £1B Funding for manufacturing sectorLoans 100K – 25M yrs interest onlyFixed rate loans 3 & 5 yrs. 1% arrangement feeOption for variable rate. Standard fees to applyUK Capital Expenditure Fund £1BLombard Scheme ~ fund acq of Business AssetsIncludes joint initiative with GTS ~Capital Import Finance SchemeSpecialist support for import of plant and machineryNatWest FundsNatWest Regional Growth Fund £70MGrant support for eligible BusinessesTo support asset purchase where we cannot lend undernormal criteriaLinked to Job creation/ retentionFranchise Fund £100M2 yrs Free Banking12m crhDiscounted Arr feeswww,natwest.com/franchise telRenewable Energy Fund £50MFund targeted at renewable energy marketManaged through the Agricultural Teams/ Dave Furnival BDDCommunity Business Loan Fund £5mLoans 30K – 500K ~Eligible ~ Social enterprises, Charity & Community Interest Companies200K # 1MEligible ~ Development Finance Institutions
39The North West Fund Funding Inspiration Event 7th June Julie BrookHead of Marketing : North West Business FinanceManagers of The North West Fund
40BackgroundThe North West Fund – £185m investment fund from ERDF and EIB“Gap funding” focused on growing North West SMEs.Combines financial return with economic benefits.Designed to create a lasting legacy fund for reinvestment.Co-investment will increase fund fire power to c£400m.Must be invested by end 2015
41FEATURESSupports funding requirements of growing SMEs through a range of debt and equity finance solutions.Improve survival of new businesses, assist key sectors in NW40% for Merseyside, otherwise a broad geographic mandate.Wide investment range (£50k to £2m) and already matched.Eligibility – B2BCreate/safeguard 14,000 jobs, generate £700m GVA (£250m by 2015) from investment into around 800 businesses.Establish a major, single branded NW venture capital and loan fund.
42Initial allocation (£m) STRUCTURENWBF is a holding fund, managing six experienced Fund Managers, each targeting a discrete segment of the market.FundManagerInitial allocation (£m)Development CapitalYFM Equity Partners45Venture CapitalEnterprise Ventures30Business LoansFW Capital35Energy & EnvironmentalCT Investment Partners20BiomedicalSpark Impact25Digital & CreativeAXM Venture Capital15
43Equity and debt Funding Equity funding means minority stakes in our invested businessesDebt Funding – risk return approachInvestment Fund with a difference – job creation targets and GVA for the region.Get more than just the money, we have expertise and networksRigorous investment processERDF and EIB support.Minimum of £50kExtended networks for next stage growth
44Progress to date Dec 2010-April 2012 £23m has been invested into over 95 businesses (inc 18 follow-on)Co-investment of over £17m has been secured in support of our own investmentAverage investment is c£250k£6.9m of investment in Merseyside into 29 businessesStrong pipeline of applications currently being assessed or completed“Out of area” applications account for 12% by number and, in our sector funds, account for as much as 35%Demand for funding from established businesses being outstripped by early stage businessesEntrepreneurs from their 20’s to 60+ have been backed so far.Examples of Merseyside companies we have invested in:Sentric Music Ltd (Chris Meehan)Rapid Rhythm (Richard Deed)Labelsneak (Ade Shannon)The Liverpool Recruitment Company (Darren Fulton)Castle Rock Recruitment Group (Ian Munro)Scraperwiki Limited (Aidan McGuire)Incanthera (Simon Ward)Hammerkit (Mark Sorsa-Leslie)Channel Intellect (Andrew Kitchen and John Shannon)Med ePad Limited (Rob Connell)Ambitious Minds (Sean McGuire)
45Progress to date December 2010-April 2012 Examples of Merseyside companies we have invested in:Sentric Music Ltd (Chris Meehan)Rapid Rhythm (Richard Deed)Labelsneak (Ade Shannon)The Liverpool Recruitment Company (Darren Fulton)Castle Rock Recruitment Group (Ian Munro)Scraperwiki Limited (Aidan McGuire)Incanthera (Simon Ward)Hammerkit (Mark Sorsa-Leslie)Channel Intellect (Andrew Kitchen and John Shannon)Med ePad Limited (Rob Connell)Ambitious Minds (Sean McGuire)
46The Investment process VisitApply online – eligibility check list and application formGood business plan helps progress to next stage –format on websiteThe appropriate fund manager should be in touch within a weekFrom assessment to decision can take from 4 weeks to 6 months - depending on circumstances.
47Debt Funding and The North West Fund for Business Loans Funding Inspiration Event 7th June 2012
48FW capital FW Capital is part of the Finance Wales Group £387 million of funds under managementFW Capital manages:£20 million North East Growth Plus Fund£35 million North West Fund for Business Loans
49lending criteria Businesses Funding requirement Established, growing SMEsMust be a limited companyMore than 50% of TO from B2BAbility to debt-service from day oneFunding requirementDevelopment/expansion capitalExamples:Additional working capitalStock purchasesOwner-occupier property purchasesPlant and machineryCapital Expenditure
50LENDING criteria Size of loans Security What do we need? £50k to £250k Terms up to 5 yearsDebenturePersonal guaranteesRealistic Business Plan2 years Financial projectionsEvidence of bank decline
51case: control valve solutions SituationFast growing companyWorking capital required to meet planned and expected growthNo security available for bank to offer extra fundingActionCompany contacted The North West Fund for Business Loans managed by FW CapitalFW Capital undertook due diligence of customer base/sector and management teamOutcomeThe North West Fund for Loans through FW Capital provided total funding packageCustomer proceeded with its growth plansNow to take on additional workforce
52Property Purchase Situation Action Outcome Purchase of owner-occupied business premises for £1.7mCustomer seeks 75% LTVBank’s credit department agrees 65%ActionThe North West Fund for Business Loans managed by FW Capital looking to provide £170k(10% shortfall)OutcomeCustomer is still able to purchase property despite having an initial £170k cash shortfall
53Working capital Situation Action Outcome Growth business requires increased working capitalBank provides increased ID lineFunding gap for up-front stock purchasesActionThe North West Fund for Business Loans through FW Capital provides £200kOutcomeCompany obtains funding to grow
54asset purchase Situation Action Outcome Business needs to purchase kit to fulfil new ordersBusiness has cash for usual depositBank’s asset finance provider seeks larger depositActionThe North West Fund for Business Loans managed by FW Capital funds the increased depositOutcomeCustomer fulfils orders thereby increasing turnover and profitability
55Lack of trading history SituationNew business with 12 months’ trading historySecures contracts with major retail chainRequires cash to fund working capitalBank unable to lend without longer track recordActionThe North West Fund for Business Loans through FW Capital lends against management and contractsOutcomeCustomer is supported to get to the next level of their growthCustomer able to develop a stronger track record with the bank
56THE Liverpool recruitment coMPANY SituationDemand for company’s services growingGrowth capital required to assist with expansion plans.ActionCompany contacted The North West Fund for Business Loans managed by FW CapitalIdentified total funding requirementStructured loan package to suit the needs of the primary funder, The North West Fund for Business Loans and the companyOutcome£100k loan from The North West Fund for Business Loans through FW Capital invested alongside the primary lenderCompany raised total expansion capital required
57The FW capital team on Merseyside Simon BerrySenior Investment ExecutiveMobileCarol BollandInvestment ExecutiveMobileStephen MolyneuxMobile
58Equity Investment and The North West FUND for Development Capital Funding inspiration event - 7th June 2012
59YFM Equity Partners Founded in 1982 Over £350 million of funds under managementVCT of the year 2011VCT deal of the year 2011Offices in London, Leeds, Manchester, Bristol, Sheffield and LiverpoolOver 50 employeesPortfolio of over 200 companiesThe UK’s most active equity investor in small businesses** Source: Private Equity Insight - based on the number of deals completed between £100k and £10m in the five years to May 2011
60The case for TAKING Equity investment Equity funding is the only way to “step change” a business.Banks lend on certainty – assets, contracts and past performance - limiting appetite.Equity invests on potential, ambition and future value - hence has “no limitation”.Equity is more patient and more forgiving.You get more than “just the money”.Don’t think in terms of “giving up a slice of the cake”; rather think “how big can I make the cake?”Equity investment should be seen as a “badge of honour” and not a sign of failure.
61The development capital fund - The Approach Looking to invest in growthInvesting in new equipment or innovationDeveloping new markets or geographiesExpanding workforceWorking capital fundingBusiness characteristics£1m to £20m turnoverAt or near profitabilitySensible gearing levelsCapable and ambitious management teamsTwo products – Mezz & Equity
62The development capital fund – MEZZ Investment £0.25m to £1.2m per round12% interest, up to 10% equity optionRepayment up to 7 yearsSimplified legal agreementCompanyEstablished businesses over 5 years trading historyCash generative and generating at least £250k net profit
63The development capital fund – Equity Equity (minority stake) and loan stockBespoke to company’s individual funding requirementInvestment £0.1m to £1.2m per roundCompanyProfitableFast growing business
65YFM Equity partners in the north west Joseph BerginDeborah HeyesSimon CleaverPaul GowerMatthew MaleJerry ScrivenIan WaterfieldSarah RileyManchester T Liverpool TE
66Risks to considerIt is in the nature of venture capital investments that considerable uncertainties exist in relation to the ability of individual Investees to establish themselves as viable businesses.As there will normally be no ready market in the securities of the Investees such investments will be essentially illiquid and may be difficult both to value and to realise. Any proposed investments are likely to involve an above average level of risk. Investment through a fund in developing businesses should be regarded as long term and as carrying a significantly higher degree of risk than more conventional forms of investment. Any interests in a fund itself will also not be readily marketable. Past performance of YFM Equity Partners or any of its subsidiaries and employees does not provide any guarantee of future performance.This presentation is addressed only to ‘Investment Professionals’ within the definition of Article 14 of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) Order 2001 and Article 19 (5) of the Financial Promotions Order. It is only meant for investment professionals with professional experience of the subject matter. It is issued for information purposes only and should not be construed as advice, nor does it constitute an offer and should not be relied on by any other person. It may not be copied or distributed or otherwise made available to any person without the express written consent of YFM Equity Partners Limited.YFM Private Equity Limited (FRN :122120) and YFM Venture Finance Limited (FRN:224728) are authorised and regulated by the Financial Services Authority. They are wholly owned subsidiaries of YFM Equity Partners Limited which is part of the GLE Group of companies. YFM Equity Partners Limited is registered in England and Wales, Co No Registered office: Saint Martins House, Chapeltown Road, Leeds LS7 4HZ.
67SUMMARYPotentially £400m of investment capital targeted at SME growth.Must be invested by end 2015.Comprises six Fund Managers with extensive relevant experience.Opportunity for North West SMEs to capitalise on this funding to generate prosperity and employment.Can stimulate ambition to allow owners and managers the potential to step change their business.Building on expertise that already exists to create an enduring legacy.The North West Fund is inspiring entrepreneurs.We are looking to inspire more.Examples of Merseyside companies we have invested in:Sentric Music Ltd (Chris Meehan)Rapid Rhythm (Richard Deed)Labelsneak (Ade Shannon)The Liverpool Recruitment Company (Darren Fulton)Castle Rock Recruitment Group (Ian Munro)Scraperwiki Limited (Aidan McGuire)Incanthera (Simon Ward)Hammerkit (Mark Sorsa-Leslie)Channel Intellect (Andrew Kitchen and John Shannon)Med ePad Limited (Rob Connell)Ambitious Minds (Sean McGuire)
69Funding Inspiration Master Class 2nd July 2012Liverpool ChamberThrough special application and assessment only through these taster events, please take an application form or apply on line atSUPPORTED BY
70Funding Inspiration Master Class 2nd July – Liverpool Chamber of Commerce How to attract a lender or an investorHow to make a strong case for fundingHow to produce a credible and readable business planPreparing and presenting your financial information.Understanding legal terms and conditions of funding.FreeSUPPORTED BY
71Thank you for attending Funding InspirationThank you for attendingSUPPORTED BY