Presentation - The North West Fund

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Funding Inspiration
SUPPORTED BY
Access to Finance
Gaynor Dykes
Is finance really available?
3 years accounts
Profitable trading record
Forecast steady growth
Regular, positive cash flow
Experienced owners/managers
Personal commitment
Good credit profile
Healthy order book
Demonstrable market demand
No/limited trading record
Past losses
Very high growth
Erratic cash flow
Unproven owners/managers
No personal risk
Blemished credit profile
Unconfirmed orders
New/unproven market
What can I do to improve my
chances of success?
Preparation
& Information
& Knowledge
Preparation
• Purpose
• Amount
• Timescales
• Repayment Period
• Stake
• Security
• Costs
Information
• Business Plan
• Up to date accounts
• Financial Forecasts
• Supporting Information
Knowledge
• What type of finance product?
• Which provider?
• Terms and conditions?
CONFIDENCE & CREDIBILITY
What are my options?
Debt or Equity?
or both??
Debt
Pros
(typically)
• No surrender of shares
• Known repayments and
repayment period
• Quicker, simpler to arrange
• Debts are tax deductible
Cons
•Evidence of repayment ability
•Personal and business security
required
•Can be inflexible
•Terms, conditions and
covenants
•Risk of becoming over geared
Equity
Cons
(typically)
• Equity is risk money.
• Appropriate at start-up stage
through to maturity
• Equity investors can often
provide valuable expertise
and contacts
• Allows flexibility to step
change a business
Mezzanine
Pros
•High growth businesses only
that can provide the investor
with a return
•Investors require a percentage
shareholding in return for cash
•Investors may require decision
making authority
•Lengthy process with
extensive due diligence
•Legal and professional fees
Finance Options
•Banks
•Invoice Finance
•Asset Finance – HP/Lease
•Trade Finance
•Social Enterprise and specialist finance
•Bridging Finance
•Commercial Mortgages
•Business Angels
•Venture Capital
•Private Equity
•Peer Lending
Alternative Finance Options
•Small Business Loans £3,000 to £50,000
•Merseyside Special Investment Fund
•The North West Fund
£50,000 - £250,00 loan
up to £2 million equity
•The Social Enterprise Loan Fund - up to £250,000
•NW Business Angels £10,000 to £500,000
•Enterprise Finance Guarantee Scheme £1,000 to £1million
•Regional Growth Fund
•Local initiatives
•Rural Development Programme
•Coalfields Fund
•Technology Strategy Board
etc, etc ...
North West Business Angels
www.nwbusinessangels.co.uk
What help can I get?
Private Equity?
Loan?
£?
£?
Business Plan?
£?
Business
Angel?
£?
Management accounts?
Access To Finance – What We Do
‘Matching Businesses with Finance’
• Ensure viable Northwest based SME’s are investment ready
• Support the process of obtaining appropriate funding
UNIQUE SELLING PONTS:
•
•
•
•
•
Impartial
Independent
Credible/Experienced/Knowledgable Team
Complimentary
Free to use
www.a2fnw.co.uk
Access To Finance – How We Do It
Review financial
performance
Support
investment
process
Discuss business
plan & forecasts
Instigate
introductions
Research
finance products
& providers
www.a2fnw.co.uk
Access To Finance – Contact Details
www.a2fnw.co.uk
[email protected]
www.a2fnw.co.uk
Cashflow & Accessing Finance
Turbulent Times
‘There is an increased
emphasis on accurate cash
forecasting in a “cash burn”
environment, and encouragement
for imaginative solutions’
Cash Management Spring 2011
A supplement to The Treasurer
Principal Sponsor RBS Group
External Risks
• Raw Material Costs
• Risk of Bad debts
• Exchange Rate Risk
• Increasing Overheads
• New legislation
Are we funding Asset Purchases and Working Capital in the right way?
(at the right time?)
Funding
•
Overdraft / Loan
•
Invoice Finance (bad debt protection)
•
Enterprise Finance Guarantee Scheme (EFG)
•
NatWest Manufacturing Fund Scheme
•
Asset Finance
•
Capital Import Finance
•
National Loan Guarantee Scheme (NLGS)
EFG Scheme
Summary
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
NatWest 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 Loan
•
•
•
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Loans can be used virtually any purpose and include :
Business acquisitions
General capital expenditure
Working Capital
Features
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 periods
• Fixed 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.
Bringing Back the Cash
‘Trading Internationally brings
new sources of customers & revenues.
However, it also brings specific
Financial risks that need
To be controlled’
Cash Management Spring 2011
A supplement to The Treasurer
Principal Sponsor RBS Group
Letter of Credit
• Can better use be made of Letters of credit to deliver better terms of
supply and payment?
Capital 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
abroad
•
Step 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
commissioned
Step 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.
•
•
Benefits
•
Working with GTS the importer, be assured of supplier payment, may have
opportunity to negotiate improved terms
•
GTS can help protect the interests of the importer ensuring payments are
only released when contractual obligations are met
•
Asset Finance agreed upfront is bridged by a LC structure rather than cash
being paid out upfront
•
Payment structure matched to customer needs and help manage budgets
with some certainty
•
End to end solution
Undisclosed
Undisclosed
2.3M Funding Package
546K Manufacturing Fund Loan
382K Capital Import Finance
•Knowsley based Manufacturer
became the first North West business
to benefit from the Manufacturing
Fund
•The Specialist manufacturer needed
the funding to help cover the costs of
orders worth £2M
•It secured 546K loan from the
Manufacturing Fund as part of £2.3M
finance package which also included
finding via the EFG scheme and
Invoice Finance
•Lombard agreed to finance new
manufacturing Line against
irrevocable deferred import Letter of
credit
•Payment against agreed milestones
and sight of commissioning certificate
•At final maturity date Lombard draw
agreed 288K under lease agreement.
Balance 94K paid by bank customer
National 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.
Manufacturing Fund £1B
Funding for manufacturing sector
Loans 100K – 25M yrs interest only
Fixed rate loans 3 & 5 yrs. 1% arrangement fee
Option for variable rate. Standard fees to apply
NatWest Funds
UK Capital Expenditure Fund £1B
Lombard Scheme ~ fund acq of Business Assets
www.capex.lombard.co.uk
Includes joint initiative with GTS ~Capital Import Finance Scheme
Specialist support for import of plant and machinery
NatWest Regional Growth Fund £70M
Grant support for eligible Businesses
To support asset purchase where we cannot lend under
normal criteria
Linked to Job creation/ retention
www.bis.gov.uk/rgf
Franchise Fund £100M
2 yrs Free Banking
12m crh
Discounted Arr fees
www,natwest.com/franchise tel 0800 092 9117
Renewable Energy Fund £50M
Fund targeted at renewable energy market
Managed through the Agricultural Teams
www.Natwest.com/agriculture
0800 092 9116 / Dave Furnival BDD 07818 427117
Community Business Loan Fund £5m
Loans 30K – 500K ~
Eligible ~ Social enterprises, Charity & Community Interest Companies
200K # 1M
Eligible ~ Development Finance Institutions
www.natwest.com/communitybusinessloan
THE NORTH WEST FUND
Funding Inspiration Event 7th June
JULIE BROOK
HEAD OF MARKETING : NORTH WEST BUSINESS FINANCE
MANAGERS OF THE NORTH WEST FUND
BACKGROUND
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The North West Fund – £185m investment fund from ERDF and EIB
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“Gap funding” focused on growing North West SMEs.
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Combines financial return with economic benefits.
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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
FEATURES
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Supports funding requirements of growing SMEs through a range of debt and
equity finance solutions.
•
Improve survival of new businesses, assist key sectors in NW
•
40% for Merseyside, otherwise a broad geographic mandate.
•
Wide investment range (£50k to £2m) and already matched.
•
Eligibility – B2B
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Create/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.
STRUCTURE
•
NWBF is a holding fund, managing six experienced Fund Managers, each
targeting a discrete segment of the market.
Fund
Manager
Initial allocation (£m)
Development Capital
YFM Equity Partners
45
Venture Capital
Enterprise Ventures
30
Business Loans
FW Capital
35
Energy & Environmental
CT Investment Partners
20
Biomedical
Spark Impact
25
Digital & Creative
AXM Venture Capital
15
EQUITY AND DEBT FUNDING
•
Equity funding means minority stakes in our invested businesses
•
Debt Funding – risk return approach
•
Investment Fund with a difference – job creation targets and GVA for the region.
•
Get more than just the money, we have expertise and networks
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Rigorous investment process
•
ERDF and EIB support.
•
Minimum of £50k
•
Extended networks for next stage growth
PROGRESS TO DATE DEC 2010-APRIL 2012
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£23m has been invested into over 95 businesses (inc 18 follow-on)
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Co-investment of over £17m has been secured in support of our own investment
•
Average investment is c£250k
•
£6.9m of investment in Merseyside into 29 businesses
•
Strong 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
businesses
•
Entrepreneurs from their 20’s to 60+ have been backed so far.
THE INVESTMENT PROCESS
•
Visit www.thenorthwestfund.co.uk
•
Apply online – eligibility check list and application form
•
Good business plan helps progress to next stage –format on website
•
The appropriate fund manager should be in touch within a week
•
From assessment to decision can take from 4 weeks to 6 months depending on circumstances.
DEBT FUNDING AND THE NORTH WEST
FUND FOR BUSINESS LOANS
FUNDING INSPIRATION EVENT 7TH JUNE 2012
FW CAPITAL
FW Capital is part of the Finance Wales Group
•
£387 million of funds under management
FW Capital manages:
•
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£20 million North East Growth Plus Fund
£35 million North West Fund for Business Loans
LENDING CRITERIA
Businesses
Funding requirement
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Established, growing SMEs
Must be a limited company
More than 50% of TO from B2B
Ability to debt-service from day one
Development/expansion capital
Examples:
• Additional working capital
• Stock purchases
• Owner-occupier property purchases
• Plant and machinery
• Capital Expenditure
LENDING CRITERIA
Size of loans
Security
What do we need?
•
•
£50k to £250k
Terms up to 5 years
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Debenture
Personal guarantees
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Realistic Business Plan
2 years Financial projections
Evidence of bank decline
CASE: CONTROL VALVE SOLUTIONS
Situation
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•
Action
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Outcome
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Fast growing company
Working capital required to meet planned and
expected growth
No security available for bank to offer extra funding
Company contacted The North West Fund for
Business Loans managed by FW Capital
FW Capital undertook due diligence of customer
base/sector and management team
The North West Fund for Loans through FW Capital
provided total funding package
Customer proceeded with its growth plans
Now to take on additional workforce
PROPERTY PURCHASE
Situation
•
•
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Purchase of owner-occupied business premises for
£1.7m
Customer seeks 75% LTV
Bank’s credit department agrees 65%
Action
•
The North West Fund for Business Loans managed by
FW Capital looking to provide £170k
(10% shortfall)
Outcome
•
Customer is still able to purchase property despite
having an initial £170k cash shortfall
WORKING CAPITAL
Situation
•
•
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Growth business requires increased working capital
Bank provides increased ID line
Funding gap for up-front stock purchases
Action
•
The North West Fund for Business Loans through FW
Capital provides £200k
Outcome
•
Company obtains funding to grow
ASSET PURCHASE
Situation
•
•
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Business needs to purchase kit to fulfil new orders
Business has cash for usual deposit
Bank’s asset finance provider seeks larger deposit
Action
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The North West Fund for Business Loans managed by
FW Capital funds the increased deposit
Outcome
•
Customer fulfils orders thereby increasing turnover
and profitability
LACK OF TRADING HISTORY
Situation
•
•
•
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New business with 12 months’ trading history
Secures contracts with major retail chain
Requires cash to fund working capital
Bank unable to lend without longer track record
Action
•
The North West Fund for Business Loans through FW
Capital lends against management and contracts
Outcome
•
Customer is supported to get to the next level of
their growth
Customer able to develop a stronger track record
with the bank
•
THE LIVERPOOL RECRUITMENT COMPANY
Situation
•
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Demand for company’s services growing
Growth capital required to assist with expansion
plans.
Action
•
Company contacted The North West Fund for
Business Loans managed by FW Capital
Identified total funding requirement
Structured loan package to suit the needs of the
primary funder, The North West Fund for Business
Loans and the company
•
•
Outcome
•
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£100k loan from The North West Fund for Business
Loans through FW Capital invested alongside the
primary lender
Company raised total expansion capital required
THE FW CAPITAL TEAM ON MERSEYSIDE
Simon Berry
Senior Investment Executive
0151 600 5340 Mobile 07879 691478
Carol Bolland
Investment Executive
0151 600 5339 Mobile 07881 958582
Stephen Molyneux
Investment Executive
0151 600 5351 Mobile 07788 314653
EQUITY INVESTMENT AND THE NORTH
WEST FUND FOR DEVELOPMENT CAPITAL
FUNDING INSPIRATION EVENT - 7TH JUNE 2012
YFM EQUITY PARTNERS
•
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Founded in 1982
Over £350 million of funds under management
– VCT of the year 2011
– VCT deal of the year 2011
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•
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Offices in London, Leeds, Manchester, Bristol, Sheffield and Liverpool
Over 50 employees
Portfolio of over 200 companies
The 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
THE CASE FOR TAKING EQUITY INVESTMENT
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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.
THE DEVELOPMENT CAPITAL FUND - THE APPROACH
Looking to invest in growth
• Investing in new equipment or innovation
• Developing new markets or geographies
• Expanding workforce
• Working capital funding
Business characteristics
• £1m to £20m turnover
• At or near profitability
• Sensible gearing levels
• Capable and ambitious management teams
Two products – Mezz & Equity
THE DEVELOPMENT CAPITAL FUND – MEZZ
Mezz
• Investment £0.25m to £1.2m per round
• 12% interest, up to 10% equity option
• Repayment up to 7 years
• Simplified legal agreement
Company
• Established businesses over 5 years trading history
• Cash generative and generating at least £250k net profit
THE DEVELOPMENT CAPITAL FUND – EQUITY
Equity
• Equity (minority stake) and loan stock
• Bespoke to company’s individual funding requirement
• Investment £0.1m to £1.2m per round
Company
• Profitable
• Fast growing business
OUR LAST FOUR INVESTMENTS
YFM EQUITY PARTNERS IN THE NORTH WEST
Joseph Bergin
Deborah Heyes
Matthew Male
Jerry Scriven
Manchester
T 0161 832 7603
Simon Cleaver
Ian Waterfield
Liverpool
E [email protected]
T 0151 600 5134
Paul Gower
Sarah Riley
RISKS TO CONSIDER

It 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 4848599. Registered office: Saint Martins House, Chapeltown Road, Leeds LS7 4HZ.
SUMMARY
•
Potentially £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.
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Building on expertise that already exists to create an enduring legacy.
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The North West Fund is inspiring entrepreneurs.
•
We are looking to inspire more.
Funding Inspiration Master Class
2nd July 2012
Liverpool Chamber
Through special application and assessment only through
these taster events, please take an application form or apply on
line at www.a2fnw.co.uk
SUPPORTED BY
Funding Inspiration Master Class
2nd July – Liverpool Chamber of
Commerce
•
•
•
•
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How to attract a lender or an investor
How to make a strong case for funding
How to produce a credible and readable business plan
Preparing and presenting your financial information.
Understanding legal terms and conditions of funding.
•
Free
SUPPORTED BY
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