business development grants & funding options david ...€¦ · funding options • personal...
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Business Development Grants & Funding
Options – David Hinshelwood
• Timetable
• Alarms
• Toilets
Objective
• To consider loan funding options for your business.
• Grant options
• Presenting successful applications
Objective
Funding Options
• Personal savings - own funds
• Family and Friends
• High Street Banks - overdraft or term loan
• Start Up Loan
• Credit cards
• Factoring / invoice discounting
• Asset finance – HP & Lease
• Crowdfunding
• Grants
• Equity investors – Business Angels
Personal savings - own funds
• Formal or informal
• Interest payments – tax implications for both parties
• Capital at risk – what if the business does not grow as
forecast – delayed repayment?
• Only “what can afford to lose”
High Street Banks
• Overdraft
– Flexible
– Agreed limit set by bank
– Interest only on amount overdrawn
– Can be higher interest rate than loan
– Arrangement fees - & usage fees
– Can be withdrawn – week notice?
High Street Banks
• Term loan
– Agreed set repayment period
– Set monthly repayments – budgeting
– Once agreed not usually withdrawn
– Arrangement fees
– Match the life of the asset
– Security?
– Reduced initial capital repayments?
Start Up Loan
• Government Programme
– Pre Start, up to 2 years trading
– Up to £25,000
– Maximum 5 year repayment period
– 6.2% interest
– No arrangement fees
– Personal loan – no security
Credit cards
• Higher interest than most other sources
• Flexible
• Convenient
Factoring & Invoice Discounting
• Payment in advance for invoices issued
• No waiting period for payment
• Factor – customer pays the factor directly
• Invoice discounting – customer pays business directly
Asset finance – HP & Lease
• Usually for purchase of capital equipment
• Secured on the asset financed
• Can have taxation benefits
Equity Investors
• Only for Ltd company’s
• Investment for a share of ownership
• Shared risks
• Return by way od dividends
• Usually £10,000 upwards
Loan Funding Options- Existing
• New kid on the block- Crowd Funding
• Actually not new
• Advent of internet now makes private funding accessible
• Value of market growing fast
• Where does the money come from?
• Private individuals willing to take a risk in return for a
better interest rate or a % of the business
• Your investment is not protected!!!!!!!!!!!!!!!!!!!!!
Crowdfunding
• Lots of small investors
• Options
– Investors receive their money back with interest
– or
– People invest in an opportunity in exchange for equity
– or
– People invest simply because they believe in the
cause
Loan Funding Options- Existing
• Lots of players
• Zopa; £753 million lent (personal loans)
• Funding Circle £537 million (business)
• Ratesetter £518 million (personal loans)
• Folk to Folk £47 million ( property loans)
• Crowdcube £61 million ( business equity)
Grants
• Do not have to be repaid!!
– But not cost free?
• Can be found through:
• Government website
– https://www.gov.uk/business-finance-support-
finder/search
• Subscription option (£15 / £25)
• http://www.grin.coop/
Grants
Grants
• Can be “government”
– EU
– Local authority
• Private
• E.g. Esmee Fairbairn
– http://esmeefairbairn.org.uk/who-we-are/
– Banks
Grants
• E.g. Esmee Fairbairn
– http://esmeefairbairn.org.uk/who-we-are/
Local Action Group (LAG) or LEADER grant
funds
• Somerset - http://www.somersetleader.org.uk/
– West Somerset / Sedgemoor
– Not Taunton nor Bridgwater
• East Devon “Make it Local” LAG -
http://www.makingitlocal.org/
• Mid Devon “REAL Devon” LAG -
http://www.realdevon.com/
• Total Fund of £1.4 – £1.5 million each LAG
RDPE Leader Funding 2014 – 2020
Eligibility
• Situated Within the Geographic area
• Small or Micro Business
– Less than 50 employees
– Less than € 10m turnover
– Less than € 10m balance sheet valuation
– Linked businesses – commonality of ownership
– TOTAL values added together
Eligibility
• Minimum project £6,250
• Usually capital expenditure
• Physical Assets
– Machinery
– Equipment
– Building conversions
• Creating employment
• Creating Business and Increase in profitability
General information
• Regulatory requirements complied with
• Planning Permissions obtained
• Environmental regulations met
• Environmental Health obligations met
• Max 40% grant fund (20% annex 1 food processing?!)
• Minimum grant applied for £2,500
• 40% intervention rate
• Minimum Project size £6,250
• “Match Funding” in place and demonstrable
• No Public Authority Funding eligible as match
• Support a “step change” in the business – not just
replacement / repair
• Not displacement – (other businesses)
• Cash flow – grant retrospectively payment?
• Cannot claim for projects already carried out
General information
•Programme Objectives
•Grants/Support to start and grow businesses – jobs and growth
•Think about planning permissions
•Matched funding?
•Business Plan
•Likely to be less than £35,000 grant (40% max intervention rate)
RDPE Leader Funding 2014 – 2020 all of Devon covered
• LEADER has 6 national priorities:
•Support to increase farm productivity
•Support for micro and small businesses (non-agricultural) and farm
diversification
•Support for rural tourism
•Provision of rural services
•Support for cultural and heritage activity
•Support for increasing forestry productivity
RDPE Leader Funding 2014 – 2020 all of Devon covered
RDPE GROWTH - New
• RDPE Growth Programme NEW
– Minimum £82,500 project
– Capital investment – not revenue?
– Rural Business Growth
– Rural Tourism Infrastructure
– Food Processing
Lottery – Awards for All
• Grants between £300 - £10,000
• Voluntary, community, school, health body
• Max 1 year
• Not existing activities (unless turnover less than £30,000
• One stage application
Lottery – Reaching Communities
• Grants between £10,000 - £500,000
• Voluntary, community, school, health body
• ideas that support:
– Lasting and sustainable changes to places and
spaces
– Communities to develop happier and stronger
relationships with each other
– Taking action to focus on the root causes of social
problems to tackle them at the earliest possible stage
Grant Process
• Usually 2 stages
– Expression of interest
• Establishes eligibility
– Full application – detailed
– Explain how meet fund requirements / objectives
– Business plan
– Financial forecasts
– Quotes for expenditure
– Etc!!??
How do I secure funding - grants?
• Have a GOOD business plan
– Take advantage of the free business support on offer
• Answer all of the questions!!
• Match the grant programmes requirements
– Access all the guidance
– Scrutinise the criteria
• Consider timescales – often 4 month application period
Grant thoughts – Full application
• It’s like an exam- answer all the questions!
• Why applying for 40% - and not 35% - justify why!
– Funding gap?
– Risk reduction for the business
– Acceptable rates of return?
– What if lower or no grant funding?
• Clearly explain the outputs – and how they will be
achieved
– match to financial forecasts – e.g. salary, income
growth
– Fully explain the forecast – all assumptions
Grant thoughts – Full application
• Understanding the market that the business operates in
– Who are the client groups, expanding market?
– Is there a market need?
– Current and proposed target market? Product, price,
demographic, geography
– Survey of potential customers?
– Longer term potential?
– Support from potential customers
– What promotional activity, why these avenues
chosen?
– Is the promotional plan costed, realistic,
Grant thoughts – Full application
• Displacement
– Is the overall market growing?
– Who are the competitors – Devon / South West /
Nationally?
– What will be the impact on the existing capacity?
• Financial forecasts
– Accurate
– Match the narrative – detail explained
– Match the assumptions throughout the plan
– Sensitivity analysis – what if only 75% sales
achieved?
– Letters of support – third party support
Grant thoughts – Full application
• Research into the proposed project – design, consultants
/ advisor support etc.
• Justify why not using alternatives – different equipment
(cheaper) hire not buy etc.?
• Environmental impact – do not ignore – how will it be
mitigated?
• Equality & Diversity Impact – policies?
• Who will manage the project delivery – what skills do
they have, what experience do they have? Reporting?
• Cost per job created?
• Quality of job – remuneration level?
• Positive impact for other businesses?
Grant thoughts – Full application
• Strong evidence of private match – written – bank,
private evidenced
• Spend time on “strategic fit” – why your project meets
the overall grant programme strategy document.
• Risk analysis – e.g. project slippage, supplier failure,
market price lower than anticipated?
Grant thoughts – Full application
• Financial Forecasts
• Sales Forecast – detailed, accurately calculated!!!
• Project Budget - detailed, accurately calculated
• Cash flow forecasts
• Profit and loss forecast
Lenders considerations
• The business proposition
– Clearly explained?
– Understandable?
– Evidenced?
• The applicant
– Skills and capability – sector knowledge
– Track record
– Personality?
• Security?
– Less important at lower levels of debt
– Ltd Co?
Business Plan Headings
• Background of business proprietors
• Business Product or service
• The Market
• SWOT
• Competition
• Advertising and Promotion
• Pricing and Cost
• Sales Forecast
• Start-up Costs
• Business Funding
• Cash flow forecasts
• Profit and loss forecast
• How the business will be operated (IT and legislative requirements)
How do I secure funding - loans
• Financial forecasting –
– obvious though it sounds, all investors will expect to
see some figures and it helps if they ADD up.
– Clearly explained and understandable
– It’s important to be realistic about what your business
is going to be able to achieve and linking your figures
back to market data can help demonstrate your
knowledge and business acumen to potential funders.
How do I secure funding - loans
• Why are you different?
– If you’re not sure yourself, you won’t convince anyone
else that your business can find space in the market.
– Be clear about what differentiates you from the
competition and how you’re going to exploit that in
order to make your business a success
How do I secure funding - loans
• How much money?
– When you’re asking other people for money, you
cannot be vague about how much you want and what
you plan to do with it.
– If it’s clear from your forecasting you need £50,000,
you aren’t helping your business by borrowing double
that amount
How do I secure funding - loans
• Selling your product or service
– It’s important to demonstrate in your business plan
that you have thought about how you’re going to
make sales.
– A storeroom full of stock is of no use to your business
if you haven’t thought through how you’re going to sell
it.
– Outlining a marketing plan will show investors you
know making sales is key to a successful business
• To consider loan funding options for your business.
• Grant options
• Presenting successful applications
Objective
• New Enterprise Allowance
• Support for Job Centre Plus claimants
• Business Planning support from volunteer mentors and advisors
• Once trading can receive £1275 of benefits
•Loan of up to £2500
Other Business Support Programmes – Pre Start
Free Phone 0330 1000338
BIP, Okehampton Business Centre, Unit 10, Higher Stockley Mead,
Okehampton, Devon, EX20 1FJ