Navigating the funding landscape – a free guide for ICAS Members
As we look ahead to anticipated economic growth in 2021, Chris Mitchell of LendingCrowd explains how clients can navigate the funding landscape as they seek essential finance to rebuild and grow.
Further guidance, useful links and information on the funding landscape are set out in LendingCrowd’s new resource guide:
Whether it’s planning a new venture or growing, diversifying or restructuring an existing enterprise, funding will be required to complete these projects before the rewards are seen. As your clients define strategies, project costs and anticipated outcomes, it is important to understand what funding is required to help achieve success.
Coronavirus financial support is changing, and more traditional funding models will re-emerge as we move to recovery and growth, leaving many in uncharted territory as they attempt to demystify and navigate the vast landscape of business finance. So, how will businesses find their routes to essential finance?
In the early periods, it is often personal cash or resources from family and friends that help a new business get started. If more capital is required, borrowing from established lenders might not be possible before a track record of profitability is demonstrated; therefore equity finance may be the only funding option to fund a business through its early stages.
Once businesses are more established with revenue and profitability, the option of debt finance becomes more accessible and there are many different types available to suit specific requirements.
Grant funding may also be available and is offered through numerous agencies, with availability often dependent on where a business operates and the nature of its activities.
The likelihood is that, even in the early years of the business lifespan, there will be a blend of funding introduced to advance the business through various stages. Therefore, it is important to understand the funding landscape and where different routes will take your clients on their journey.
Seek out public sector support
Particularly in the early stages of the business funding journey, it is prudent to investigate what public sector support is available. Public sector agencies are very proactive in this area and offer a magnitude of practical support for businesses to help them identify and source the most suitable funding and prepare viable applications. Agencies include Business Gateway for new and small ventures, Scottish Enterprise for emerging companies and the recently launched Scottish National Investment Bank for more established enterprises.
Understand different funding models
Usually involving a cash purchase of shares in a business, this cash investment is available for business use, while new shareholders stand to benefit from future success through dividends from profits and an increased share value. Investors may also have a say in how the business is managed as a whole, or within certain functions. This provides the opportunity to add expertise and experience to the management team, creating additional growth potential. Therefore, it is important that investors are chosen carefully. It’s not just about the money ¬– business fit and compatibility are key areas of focus.
When a business is more established with identifiable revenue or profitability, the option of debt finance becomes more available to fund a multitude of activities. Debt finance involves borrowing an amount over a specified term, usually with a structured repayment schedule.
The market for debt finance is extremely vast and varied. For decades, a handful of large banks have dominated the market for business lending and many businesses still think of their main bank as their first and only option for finance. However, research has shown that half of SMEs that have their loan application declined by their bank choose to look no further, believing there are no other options available. Therefore, it is important to focus on the growing non-bank lender market.
The funding landscape is evolving rapidly, and businesses now have access to a wide range of finance providers, including challenger banks and non-bank lenders such as LendingCrowd, which offer flexible finance solutions to businesses.
Aside from Coronavirus business support, grant funding typically involves a sum being provided to a business to part or wholly fund certain projects. Availability usually depends on the business size, location and sector, combined with the activities for which funding is sought.
Tailored funding packages
With such a wide variety of finance available to suit different opportunities, it is quite common for many types to feature at once, complementing each other to create a tailored funding package to suit the individual requirements of each business.
During these challenging times, your clients will need help to navigate the financial landscape. LendingCrowd has produced a free guide to the wide range of funding routes that are available to SMEs.
Join the Ask ICAS Webinar
As your clients plan ahead and consider their forthcoming funding needs, or are curious about how to raise additional funding, it is important to review all the options. Sourcing the most suitable finance for your client’s specific needs should help their business succeed while avoiding unnecessary complications further down the line.
Join our webinar at 11am on 8 April, when the funding landscape will be brought to life by special panel members in the Ask ICAS series. We’ll help you identify the most appropriate route to help your clients finance their ambitions and answer your pertinent questions.
Panel members are Chris Mitchell, Senior Business Development Manager at LendingCrowd, Gary Torbett, Head of Financial Readiness at Scottish Enterprise, and Martin McLaren CA, Investment Director at Maven Capital Partners UK LLP.
LendingCrowd, the trading name of Edinburgh Alternative Finance Limited, was founded to help SMEs thrive by giving them access to non-bank lending. To find out more about LendingCrowd, call 0345 564 1600.