Funding opportunities for local businesses in the East & South East Midlands

The East & South East Midlands region is fast becoming one of the UK’s leaders in transport infrastructure and a destination of choice for international investors. Home to some of the most attractive and cost-effective places for commercial property, the region supports a range of businesses with a number of sector strengths including: life sciences, manufacturing, finance, transport and low carbon technologies.

Maven’s local office in Nottingham, is based at the heart of business and transaction activity for the East & South East Midlands. We caught up with our East & South East Midlands team to find out what opportunities are available for local businesses.

1. What do you think are the main obstacles to accessing finance to grow that businesses face today?

One of the main obstacles to accessing finance used to be the limited number of finance providers operating in the market. However, over the last ten years, there has been a huge expansion in funding options for SMEs, so the challenge is now how to navigate what can be a confusing landscape to find the right solution. Fortunately, there is also an active advisory community of accountants, finance brokers and other intermediaries ready to help.

This is important because some businesses can lack the capacity or skills to identify the right type of finance and to prepare to approach funders. Success in raising finance is largely, down to preparing a strong business plan, complete with detailed financial forecasts, understanding those numbers, and being clear about what an injection of capital could do for the business. External advice and support with this process can really help.

Selecting the right sort of finance is crucial and getting it wrong can set the business back – early-stage businesses with limited assets, or minimal revenues, are unlikely to be attractive to debt funders. Conversely, SMEs which lack proprietary technology or another USP will find it hard to persuade an equity investor seeking an attractive investment return.

One of the other key challenges that businesses face is not planning effectively, don’t leave it too late before you need funding for your business, and be mindful that the process may take longer than you think. Lenders and investors will take time to get to know you and your business if they are going to commit to a long-term relationship.

2. How can businesses determine what growth stage they are at and what components they need to help secure the right funding to grow?

It is extremely important to identify where you are in the growth cycle as different funding options, short, medium or longer term, all open up at different stages. Start up, early stage and for established businesses, expansion are recognised stages.

Taking these in turn:

Start Up - generally no track record of sales, just an idea that has now turned into an actual operational business with a small number of customers. Funding success will be governed by quality of business plan, experience of management both in and out of the sector, professional support and some realistic forecasts. Such “seed funding” often comes from managements own resources, friends and family. Some high street banks have specific products, but many expect start-ups to self-fund, however some specialised lenders may help.

Early Stage (less than 2 years) – sales traction is achieved and growing, hopefully evidenced by retained profits even after the directors/ owner managers remuneration. Funding attractiveness increases with evidence of early success, updating of business plans and forecasts plus willingness of directors/ owner management to perhaps put own assets on the line via supported/ unsupported personal guarantees, until company assets have grown to underpin themselves.

Established /expansion phase – year-on-year turnover growth, customer volumes and reach are being seen, which then feeds down into the bottom line. Such increasing profitability, customer diversification and staffing additions, then evidences economic contribution. A growing company asset base alongside such profitability is then more attractive to a bank or other lending providers including Government Supported Debt Funds such as our own Midlands Engine Investment Fund (MEIF).

Whatever route you take to any type of funding be it debt or equity, and at whatever growth stage, the common and key components will always be very similar. A good business plan, realistic forecasts, passionate and knowledgeable management supported by experienced professionals and an identified clear market opportunity for your service or product where your “unique service proposition” will make a real difference.

3. How can a business help to prepare itself before applying for funding?

This is a great opportunity to explore all your funding options as there are a number of types and sources to choose from. What works for one business may not be suitable for another. Also, depending on your business’s growth stage, sector or location this can affect which funding options will be available to you. Some of the key funding options that you could consider are: grants, loans, overdraft, crowd funding, angel investments, venture capital and family or friends. Your choice of funding will determine how you move forward with your plan.

Asking for the right amount of money is a key part of successfully raising funding. It should be linked to the financial projections you should have produced to support your application and should also include an amount for contingencies/headroom. Many businesses fail because they were under-capitalized, have no ‘buffer’ amount or contingency plan. Make sure your figures stack up and do your research. A lender/investor may be put off if what you are presenting is simply not realistic or feasible.

Acquiring funding typically takes several months, but you should always plan for the worst-case scenario and delays. You don’t want to be in a situation where you desperately need cash when you’re working on deal terms as this may cause you to accept terms you’re not comfortable with. The road to funding can be a long one. Even a great proposition and well-researched business plan can’t bypass delays. Make sure you and your business can survive until funding is secured.

4. As a national company, what other funding and support opportunities does Maven bring to the Midlands?

Beyond the MEIF Debt Fund, Maven is one of the UK’s most active SME finance providers investing through Venture Capital Trusts (VCTs), an MBO Fund, Maven Investors Partners network and a Property Fund. The MBO fund is available to fund management buyouts in the smaller and lower mid-market investing equity of £5m - £25m. The VCT’s provide growth capital for dynamic, profitable UK based younger companies (less than 7 years established) looking for equity of £1m - £5m. The Maven Investor Partners fund invest equity capital for smaller MBO transactions whereas the Property fund invests equity capital of £1m - £10m for development of Hotels, Student Accommodation, Offices, Residential Construction and Strategic Land. All of these are UK wide funds available to appropriate businesses in the Midlands.

If your business is in need of finance to help unlock its growth potential, MEIF Maven Debt Finance may be able to help. Contact Maven’s local team today to find out more.