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FINANCING FOR BUSINESS
The Swale Business Conference 2015
Gavin Coleman - Handelsbanken
www.handelsbanken.co.uk/chatham
Introduction
• Gavin Coleman
• Branch Manager Handelsbanken (Swale & Medway)
• 17 years within the Banking industry
• Diverse banking experience:
• HSBC
• Barclays
• Clydesdale
• Handelsbanken
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
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
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
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
Bank Finance
Potential solutions include:
• Loans
• Overdrafts
• Asset Finance
• Invoice Finance
• Trade Finance
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
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
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
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
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?
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
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.....
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
Alternative Finance
Solutions include:
• Asset Based Lending
• Supply Chain Finance
• Trade Finance
• Peer to Peer Lending
• Grants
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
Financing For Business
Any Questions?