Looking to take your business to the next level? From challenger banks to investment syndicate opportunities, there are options available for funding business growth whatever your size.
Regardless of whether your business has been thriving or struggling over the past 18 months of lockdown, now is an ideal time to look at how to fund business growth and recovery.
Adam Maitland, director at Hutcheon Mearns who specialises in mergers and acquisitions (M&A) and corporate finance, sat down with us to discuss all things business funding.
Here are a few key things that could be just the boost your business needs.
1 Ask the bank for funding
Of course, we have to talk about the banks. There are different bank funding facilities available, including some you may not be aware of like:
- Invoice financing (the bank will advance money on an unpaid invoice).
- Supplier financing options.
- Lending against an asset fleet.
Adam says: “You can go to your bank and you can ask for new facilities. The challenge is that high street banks are risk averse and always have been. So they’ll be supportive to an extent.”
Basically, you’ll need to be able to showcase the right level of earnings and cash flow, and importantly post-COVID, a recovery plan if appropriate.
But don’t forget that there are also new challenger banks offering debt funding, who can potentially take more of a risked view on lending.
Adam adds: “They’re higher cost in terms of interest you pay, but they’re easier to get across the line and there’s significant capital availability there.”
2 Funding business growth with private equity investment
Another option for funding business growth is private equity investment.
Adam explains: “The good thing about the private equity market across the UK is that there’s a huge amount of capital availability and ‘dry powder’.
“Ultimately, the private equity model requires the deployment of capital. All through the last 18 months, it’s been difficult to do deals, so there’s real appetite to invest in growth businesses and put money to work.”
For the right business, in the right market, there is cash available (take green energy tech or direct-to-consumer markets, for example).
The problem is that businesses tend to have to be operating at a certain scale to be attractive to ‘typical’ private equity firms, and you’ll need to have a clear strategy about the future including long-term exit planning.
The goods news is, Hutcheon Mearns can help with your ‘investment readiness’, making sure you’re well prepared and have the best opportunity to maximise value.
3 Advance your innovative business with an investment syndicate
Investment syndicates – effectively groups of high-net-worth individuals looking to invest – are filling a vital gap in funding for earlier stage innovative businesses.
“You’ve got banks that are looking for cash positive businesses, you’ve got typical private equity that are into larger businesses. But if you need half a million pounds, where do you go?” says Adam.
“Investment syndicates can help bridge that gap – allowing you to reach the point of commerciality and positive cash flows, and then you can bring in someone else. The downside with those guys is that they just see so much activity, they could see 20 pitches a day coming across their desk.”
Again, expert help will ensure the right propositions reach the right people, in a well-articulated way.
4 Adopt strategic planning to take your business to the next level
Perhaps you’ve come through Covid and, whilst your business may be in better shape, the challenge now is delivering on the growth plans.
Strategic trade players are becoming more active in the M&A market, looking for businesses that can add technology or synergistic value to their offering. Focused combinations have the potential to drive significant value and accelerate growth.
Adam notes that several clients recognise that “on their own it will take them a longer period of time to get to where they want to be, than it would with a large global entity that can really support them from an operational, sales and footprint perspective.”
Despite the pandemic, the M&A market is buoyant and it may be the right time to explore a tie-up with a larger organisation.
How do I find the right funding for my business?
With so many different options for funding business growth available, how do you know what’s the right one for you? A strategic business plan is key.
Adam says: “Hutcheon Mearns welcomes that conversation. We pride ourselves in spending significant time with our clients, understanding their business and recommending options.
“So that’s getting into the nuts and bolts of a business, assessing their market backdrop, operations, team, technologies and longer term growth options”
Transform your business finances
with Hutcheon Mearns
Finance specialists Hutcheon Mearns has a unique offering, combining business advisory (solving complex finance problems for companies) and people advisory (helping businesses develop a suitable finance team).
Based in Aberdeen but serving clients across the globe, Hutcheon Mearns also recently opened a new office in Dundee, Scotland. This is ideally placed to support both early stage and established local businesses.
Discover more ways of funding business growth and develop a strategic business plan with Hutcheon Mearns.
