NGFC guide to sources of funding
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This document provides information on sources of finance for London entrepreneurs, including: - Bootstrapping through personal funds, friends and family, customers, and suppliers. - Loans from banks, community finance institutions, leasing companies, and invoice lenders. - Investors such as private investors, venture capitalists, crowdfunding sites, and government investment funds. - It emphasizes matching the right source of finance to the entrepreneur's stage of business and financial needs.
NGFC guide to sources of funding
- 1. Slide deck Guide to Sources of Finance for London Entrepreneurs March 2012 www.ngfc.org.uk
- 2. Next Generation Finance Consortium Members www.ngfc.org.uk
- 4. • Bootstrapping through Personal resources (time and money = sweat equity you are investing) • FFF- Family Friends & Fools – People who will give you funds with little questions askedincluding reward based crowd funders such as Peoplefundit. • Government Grants • Customers and Suppliers- “Build slowly at low risk by obtain credit from suppliers and growing business through profits from paying customers” • Loan providers- “Increase business growth ambitionsby increasing investment by taking out debt” – Banks ( Overdraft-unsecured and secured loans) – Community Finance Institutions ( Soft/ unsecured loans for riskier ventures) – Leasing Companies. – Invoice lenders (Factoring, invoice discounting) – New loan markets such as Market Invoice and Funding Circle. • Investors- – Private Investors- Business Angels such as Angel Capital – Venture Capitalist – Crowdcube – Government Backed Investment Funds Matching the right mix of sources to the right stage and type of finance is the key to successful fundraising www.ngfc.org.uk
- 5. You can’t a business loan from a bank because? Banks only make a margin on loans of between 2-7% -so they can only afford very low default rates and this means they will not lend to a business or entrepreneur that is deemed “risky”. And you are deemed an unacceptable risk if: 1. You have a bad credit history 2. Failure rate in you business sector is high 3. You have no confirmed customer invoices- no evidence of sales = no evidence you can re-pay the loan 4. The business has no trading history – difficult to get a loan unless been trading for over 6 months 5. You are unable to offer security to cover the bank if the business fails. 6. Your customers are overseas –so there is a risk they cannot be legally forced to pay for goods ordered. 7. What you want to do with the borrowed money is widely regarded as having a poor success rate e.g. Research and developing a new product and especially marketing. If any of the above applies to you then look at the Next Generation Finance Consortium Members. www.ngfc.org.uk
- 6. Step 3- Match the funding need to purpose? www.ngfc.org.uk
- 7. Where do NGFC Figure 1. 4 Steps to developing a high growth business. ( Source HBR) members fit www.ngfc.org.uk
- 8. NGFC Member Funding Match- Where & When we can help. Capital Enterprise can help early stage entrepreneurs sources of “proof of concept” funding ( including R&D grants) and help entrepreneurs to develop scalable business models and plans. Peoplefund it can help early stage businesses raise funds to develop and test proto- types and fund market launches. CDFA members & North London Community Finance can help pre-revenue entrepreneurs raise small loans (£5-10K) to launch a business and provide income generating growing businesses larger ( £10-25K) unsecured loans to fund cash-flow Crowdcube can help scalable businesses with some to market validation to raise seed funding ( £50K+ )from a “ crowd” of small investors. Angel Capital is looking to use the Seed Enterprise Investment Scheme to help raise £100-150K for entrepreneurs with proven scalable business models. Angel Capital can also help raise up to £1m for scalable businesses with proven management teams Market Invoice has a market of lenders willing to issue relatively cheap loans to companies needing cash to fund individual confirmed orders including those from overseas. www.ngfc.org.uk
- 9. Information: • Capital Enterprise What’s On in London- www.capitalenterprise.org/whats-on • Business Link - www.businesslink.gov.uk • Start- up Britain - http://www.startupbritain.org • British Library- www.bl.uk/bipc • HMRC Small Company Enterprise Centre- Source of advice and help http://www.hmrc.gov.uk/manuals/vcmmanual/VCM10050.htm • HMRC R& D Tax Credits www.ucl.ac.uk/advances/advances-news/hmrc • HMRC Guide & Support- http://capitalenterprise.org/guide-to-rd-tax-credits • British Business Angel Association: www.bbaa.org.uk • Guide to Early Stage Investment: http://www.paloalto.co.uk/about_us/Early_Stage_Investment_by_Alan_Gleeson.pdf • Guide to 100 offers for start-ups – www.capitalenterprise.org And if you have not checked them out please look at the latest schedule of advice and training events at : www.ngfc.org.uk . www.ngfc.org.uk
- 10. Need less than £10K to start? Grant- www.j4b.co.uk No Funds New Enterprise Unemployed? Allowance Scheme Need Less than £10K to Launch a Self Fund business Community Development Write a simple Finance Institution Borrow Business Plan & 12 month cashflow Bank - Sources of Grants- www.j4b.co.uk - Competition funding £1000 issued to 10+ businesses per month- http://www.shell-livewire.org - Princes Trust http://www.princes-trust.org.uk/need_help/enterprise_programme.aspx - New Enterprise Allowance Scheme – Check who delivers the scheme in London by e-mailing Capital Enterprise. - Community Development Finance Associations- http://www.cdfa.org.uk - Also check out North London Community Finance - ELSBC Access to Finance – Business Plan support for those looking to raise up to £10K www.ngfc.org.uk
- 11. Sources of Finance for those looking to start and grow a scalable business ? ( i.e. need more than £10K?) www.ngfc.org.uk
- 12. Getting ready for finance? Accelerators : Training & Mentoring programmes that provide fast-track to seed funding for scalable new businesses • Lean Camp : http://leanca.mp • Seed Camp: http://www.seedcamp.com • Start-Up Weekend: http://london.startupweekend.org • Launch 48: http://launch48.com • Tech Hub : http://www.techhub.com • The Business Bootcamps- www.thebusinessbootcamp.org • Accelerator Academy- http://acceleratoracademy.com • Innovation Warehouse- http://www.theiw.org • Hubventurelabs - http://hubwestminster.net/hubventurelabs Practical Help with Accessing Finance and Business Planning • CEME Gateway to Investment Service • Enterprise Enfield- Invest in Success • Prevista –Raising Finance Service • UCL Advances-HELO Project ( Student Interns)- http://www.ucl.ac.uk/advances/business/support/helo • E-Innovate- http://www.gle.co.uk/advice/developing-innovation.php • Enternships- http://www.enternships.com • Enterprise Agencies offering 1-2-1 support- www.capitalenterprise.org/members • Mentors Portal- www.mentorsme.co.uk www.ngfc.org.uk
- 13. Looking to Borrow from an alternative to traditional banks and finance providers ? Debt Funding Initiatives- Trading Businesses Only • CDFA ( Soft Loans from Community Finance Institutions willing to provide unsecured loans to trading businesses who banks are unlikely to fund)- http://www.cdfa.org.uk - Frederick Foundation- http://www.fredericksfoundation.org - East London Small Business Centre- www.goeast.org - North London Community Finance- http://www.northlondoncommunityfinance.org/ • Enterprise Finance Guarantee ( Government underwriting UK banks business loans so SME’s can get unsecured loans) http://www.rbs.co.uk/business/borrowing/g1/firms.ashx • Examples of New types of funding: • http://www.marketinvoice.com- : Need to fund an export order, government contract or orders from late paying large customers then check out this new and very cheap source of funding. • http://www.fundingcircle.com • Green/ Energy Efficiency loans: http://www.carbontrust.co.uk/cut-carbon-reduce-costs/products- services/financing/pages/financing.aspx www.ngfc.org.uk
- 14. Looking for investment? Crowd funders- Crowd Cube: http://www.crowdcube.com– The UK site for those looking to raise investment (£20K-£1m)from a “crowd” of small investors. Business Angels- • London Business Angels: http://www.lbangels.co.uk • London Seed Capital - http://www.londonseedcapital.com/ • NESTA - www.nesta.org.uk/investments • Start-up funding club- http://www.startupfundingclub.com • Oxford Early Investments- http://www.oxei.co.uk/about.php • Envestors- www.envestors.co.uk Early Stage Venture Capital Firms • Amadeus- http://www.amadeuscapital.com/about-seed.php • Balderton- http://www.balderton.com • DfJ Esprit - http://www.dfjesprit.com • Doughty Hanson- http://www.doughtyhanson.com/technology-ventures.aspx • Early Bird Ventures- http://www.earlybird.com • Index Ventures- http://www.indexventures.com • Octopus- www.octopusventures.com www.ngfc.org.uk
- 15. SEIS- Tax breaks to encourage investment in start-ups Seed Enterprise Investment Scheme-SEIS is a tax break launched in April 2012 for UK tax payers to encourage them to buy shares in start-up companies registered in the UK The Facts: • SEIS investors can input £100,000 in a single tax year rising to a maximum £150,000 over two or more tax years in to a single company • Investors cannot control the company receiving their capital • Investors pick up 50% tax relief in the tax year the investment is made, regardless of their marginal rate. • In the 2012-13 tax year, tax payers can roll any chargeable gain in the tax year in to a SEIS with a full capital gains tax exemption (another 28%) • The business must be a start-up company -registered in the UK within 2 years of claim. • The company must not employ more than 25 workers. • The company must have assets of less than £200,000. • The company has to trade in an approved sector – generally not in finance or investment, for example, a property company raise capital as a SEIS. www.ngfc.org.uk
- 16. Looking for funding to turn your idea into a proto-type product/ service ? Grants & Awards • J4B- Portal for grant finding http://www.j4b.co.uk • Technology Strategy Board ( R&D Funding) - http://www.innovateuk.org - http://www.innovateuk.org/content/competition/grant-for-rd-single-business.ashx • E Funding for SME R&D - http://www.eurostars-eureka.eu/what.do • EU Funding for R&D collaborations: http://ec.europa.eu/research/participants/portal/page/calls • Knowledge Transfer Partnerships funding support- http://www.ktponline.org.uk/ktp-what-will-it-cost- my-business Translation/ Follow on research funds. • www.rdfunding.org.uk/bulletin/queries/Search.asp?TheCloseMonth=July&TheYear=2011. • http://www.rcuk.ac.uk/kei/ktportal/Pages/Followon.aspx • https://ktn.innovateuk.org/web/145175/overview • http://www.wellcome.ac.uk/Funding/Technology-transfer/Awards/Translation-Awards/index.htm Crowdfunding Platforms- Peoplefund.it – will help you to raise funding to build a proto-type and market test a great idea or product.- www.peoplefundit.org www.ngfc.org.uk
- 17. New Initiative’s launched in 2012. • The CISCO Big Awards- Come up with a great business idea and win £200,000 https://www.thebigawards.co.uk • Dreamstake- launch of their accelerator platform on the 22nd March http://www.thebusinessbootcamp.org/pivot-party-dreamstake • Green Accelerator – led by well- known Green Entrepreneur James Cann - http://bertiinvestments.com/berti-green-accelerator/ • TECH- There are also a few impressive pitching for investment events coming up for tech entrepreneurs. – http://innotechsummit.com/ – http://www.globalcorporateventuring.com/article.php/3265/tech-scout-awards-and- symposium-14-15-may-2012?mgs1=15d975st0T www.ngfc.org.uk
- 18. Step 5: So remember –What’s important when seeking finance • The quality and “connections” of the management team • The size of the business opportunity/ funding need • The scope for building a sustainable competitive advantage • The level of risk/ security. • And the timeliness of the proposal Will determine the attractiveness of your business to investors, lenders and funders • The ability of the entrepreneur to negotiate well and of the team to execute the business plan convincingly- Will determine the type, price and quality of the deal that can be achieved www.ngfc.org.uk