FINANCING FOR BUSINESS

Transcription

1 FINANCING FOR BUSINESS The Swale Business Conference 2015 Gavin Coleman - Handelsbanken

2 Introduction Gavin Coleman Branch Manager Handelsbanken (Swale & Medway) 17 years within the Banking industry Diverse banking experience: HSBC Barclays Clydesdale Handelsbanken

3 Handelsbanken Over 200 UK Branches Traditional Relationship Banking Decisions based on individual circumstances and local knowledge 95% lending decisions agreed locally Full range of competitive banking products and services for Businesses and Individuals Focus on long-term relationships and customer satisfaction No call centres just direct access to your team No sales targets or staff bonuses

4 Financing For Business Initial Considerations Understand what the borrowing purpose is Working Capital funding contracts, bills etc. Growth Capital funding equipment, premises etc Understand the choice of finance options available Equity Funding Bank Funding Alternative Funding solutions Consider how to prepare and present your proposal Seek professional advice & input as required Consider how to present your proposal for maximum effectiveness

5 Equity (Investor) Finance What is it? Selling Shares in your business to an investor Government incentives can make this attractive to potential investors (SEED/ Enterprise Investment Scheme & Venture Capital Trust Scheme) Finding Investors (Be prepared & take the right advice) Friends & Families Angel Investors/Networks Venture Capitalists Private Equity Firms/Public Placement Consider Investor exit strategy

6 Equity (Investor) Finance Advantages Investors can bring new skills/opportunities to the business Share the risk of the business with the investor Don t have to pay interest or monthly loan repayments No additional liability if the business fails Disadvantages Can be demanding, expensive & time consuming (higher risk/higher return) You will own a smaller % of the business Shareholders may want input in decision making Only available to Companies not sole traders/partnerships

7 Bank Finance Potential solutions include: Loans Overdrafts Asset Finance Invoice Finance Trade Finance

8 Bank Finance Loans/Asset/Trade Finance Advantages Generally repayable over an agreed period (not normally on demand) Can be tied to the lifetime of an asset/investment/trade Don t have to pay a % of profits to the Bank Disadvantages Not as flexible as some other funding options Often secured by assets (that are at risk if repayments not met) Will often only cover a % of total costs

9 Bank Finance Overdrafts Advantages Flexible borrow what you need when you need it No early repayment charges Good for funding working capital as monies owed will repay borrowings. Disadvantages Repayable on demand Usually only available from your main current account Banker & may require supporting security. Lower % of debtor book funded via OD compared to other working capital funding solutions Does not grow in line with your t/o growth

10 Bank Finance Invoice Finance Advantages Flexible borrow what you need when you need it Funding line usually grows as business grows Release value tied up in your debtor book secured by these assets Invoice Discounting Confidential Factoring outsource debtor collection Disadvantages Normally only B2B invoices funded Costs more than OD funding Factoring is disclosed to your customers

11 Gaining Support From Your Bank Early discussions Your Bank can assist you in shaping the deal to support provision of debt funding and choices available to you Build trust and understanding both ways Understand if this is likely to be a deal they can support Use Professional advisors leverage their experience/contacts/expertise Provide broader context Can they recommend somebody else if necessary

12 Gaining Support From Your Bank Not all Banks are the same Lending Policy/Credit Appetite Bankers & Bank s experience Other s experience of them Desire/time available to work with you Capacity to influence decision making Security/Government Schemes Other options - recommendation Is it Equity or Debt Funding required? Debt = Low return/low risk Equity = High return/high risk Clear dividing line?

13 Gaining Support From Your Bank Aspects of a Strong Banking Proposition Detailed plan for your business You know your business/plans You must try to get somebody else to understand it equally well Warts and all highlight +ves and ves How will you retain +ves How you will manage ves Understanding of your stake/contribution/security What if scenario what options are available to you Repayment capacity is crucial Ideally predictable/strong Cash impacts of success/failure

14 Gaining Support From Your Bank Summary: Understand the cause of your borrowing request Consider the options available to you All banks will have different views Understand your Bank s approach Work with them to shape a deal or find another provider... Use external advisors support & experience Concentrate on the ability to repay debt requested If necessary know your other options...

15 Alternative Finance If the Bank cannot help it does not mean a proposal is weak. Instead it may just require a different solution. Massive growth area since the financial crisis New solutions to meet the market demand New ways of funding (eg Peer to Peer & Crowdfunding) New niche solutions (eg Single Debtor Invoice Finance/Tailored funding to specific sectors) Preparation of your proposal remains key to success Support and advice available

16 Alternative Finance Solutions include: Asset Based Lending Supply Chain Finance Trade Finance Peer to Peer Lending Grants

17 Sources of Additional Support Including (but not an exhaustive list) Banks Accountants Chamber of Commerce Swale Economic Regeneration team Alternative Funding Providers Federation of Small Businesses

18 Financing For Business Any Questions?

19 Finance For Business Thank You Gavin Coleman Tel: Mob: