Filling in the gaps in the safety net

Today's the day that the government's Job Retention Scheme gets going in earnest with the portal open for firms to apply for payment.   And the word Furlough has well and truly re-entered the language with many firms already having Furloughed staff, and which will now be applying to get the grants.  I know that my tax colleagues have been active today helping with this.

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If you were being unkind you'd say that that government's support for business whilst swift and very welcome was full of gaps.  These are gradually being filled.  The Corona Business Interuption Loan Scheme (CBILs) was onerous in terms of the guarantees required from business.  But now the guarantee requirements have been softened.  Then there was a gap above CBILs and below the Corvid Corporate Financing Facility for larger businesses.  This has now been filled with the Coronavirus Large Business Interruption Loan Scheme (CLBILS) .  Incidentally why the confused approach to naming these, one's Coronavirus, and other Corvid?

All this still leaves a gap for businesses that don't pass the viability test for CBILs - ie that it would have been viable in 2019 and will be in 2021.  Such businesses are going to have to look to other sources of finance, including the various tax related supports that have been made available, and negotiations with their creditors.  Expect to see the insolvency practitioners busy with a rash of CVAs, prepacks and phoenixes in the Autumn for those firms that can get through until then.

And yesterday the Chancellor announced a £1.25Bn rescue package for start-ups.  He intends to grant c£750m to start-ups through Innovate UK's network of funds.  And to set up the Future Fund which will channel £500m via the British Business Bank to suitable candidates.  Cleverly the loans are conditional on private investors putting in 50% of the money, which should help to filter out the lost causes.  The government will have some kind of equity conversion after three years unless the loans are repaid.  That either means that they'll be left with equity in no hopers, or will have soft conversion rights - or new investors would surely take them out.  But I guess that's a small issue compared with the other burdens the treasury is taking on to support business.

This must be welcome news for venture capital / private equity funds which I know have been closely monitoring their portfolio investments through this crisis.

So the safety net probably still has holes in it - but at least they're becoming fewer.  It'd be nice however if the gaps could  be filled before business groups have to start lobbying as was the case with the start-up community which looked enviously at the generous support in places like Germany, and lobbied hard for this.

We have a Corona Virus hub on our website with lots of information and also practical insights on how to access the right funds.

If you're grappling with how best to access this support, or would simply like to discuss your strategy, get in touch - I'd be interested to hear how you're tackling it.  

 


Cambridge and East Anglia Businesses asked to think strategically about growth

Flyer_front_cover_Cambs_Oct15With the Cambridge and the East of England economy continuing to perform strongly we're hosting a free educational morning seminar targeted at local small and medium size business owners (in the £1m-£100m turnover band).

Alongside our own corporate finance, and tax specialists we have speakers from our joint event hosts Barclays and Business Growth Fund who will give insights into raising debt and equity finance.   The whole event is designed to give business owners practical ideas on developing a strategy for growth.

Any acquisition should have a sound strategy underpinning it.   And it should look not only at the why and how, but also at the long term implications – when will you see benefits? Will it make your business more attractive to buyers?”

As well as giving advice on acquisition, we'll cover using strategic growth to maximise the value of a business.  The event is going to be comprehensive, guiding attendees from growth right through to succession or trade sale.

The seminar will run from 8.30am to 12.30pm at The Trinity Centre in Cambridge on 22 October. Registration is free; for more details or to book, please visit http://www.pem.co.uk/corporate-finance/growth-cambs


Raising equity finance. First mitigate dilution through good housekeeping

Many entrepreneurs are wary of selling equity to outside investors.   Whether its at the early stage where the main source of funding is likely to be Angel investors or later when VCT and Private Equity investors may be the sources.   

The concern is of course about control, and how it will change the business.  Will the new investors meddle?   Of course get the right investor and what to some feels like meddling will in fact be a truly positive value added contribution to the business.  The right investor, or their appointed non-executive director, can bring additional experience, knowledge and contacts to the company.

But before you get to raising equity its worth challenging whether or not you really need it.    And sometimes you just need some good housekeeping to reduce your cash needs.  How about these simple thoughts:-

Supplier investment

Your supplier base may be able to part fund your growth.   Maybe not through direct investment, but they may be able to go for extended credit, or perhaps the will be prepared to support you through marketing costs.

Change your working capital profile

Could you do business in a different way?  How about charging for some or all of your work up front?  Could you introduce deposits or progress fees?  Better still could you get your customers to pay up front and move to a subscription basis? 

Narrow your aiming point

Sometimes the big cash requirement is because businesses aim to make a big step forward, or to tackle a lot of new things at once.  Could you scale that down to the true priorities, grow the business and then if you need to raise equity later it will be at a time when you’re profitable and so you’ll be able to raise capital at a higher valuation?