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By Chris Eddowes

Despite the ever growing number of finance options available, the British Business Bank have reported that “Demand for external finance continues its long-term decline, with just 36% of smaller businesses now using external finance compared to 44% in 2012”.

Lack of confidence and/ or lack of awareness of the funding options?

Various reports indicate there has been a decline in confidence of the business owner to take on external finance in these times of financial and political uncertainty.

However, some reports also attribute the decline in demand for external finance to the lack of awareness of the funding options available.


Interestingly, the British Business Bank are heavily promoting their ‘Finance Hub’ which I have not checked out properly yet, but it appears to cover Equity and Debt (I will look some more at this tool to see if it covers grants in due course).  There is also the ‘Growth Hubs’ in each Local Enterprise Area that should be able to assist.  And of course there is us… we have a specialist Corporate Finance team that engage in the ‘large’ and ‘more complex’ fund raises; complemented by the general practice managers and partners to service the requirements of our client base.

My colleagues and I will be blogging on the range of funding options in the next few months – in the lead up to and following on from our ‘Finance in’ events (the first of which is Finance in Cornwall on 25 June 2019).  This blog will now focus on ‘debt’.

Debt – the many strands (and how to untangle)

There are many strands of debt finance – the main ones are highlighted below:

Finance Type                                      How it works Advantages
Asset finance Funding to purchase or refinance business equipment, spreading the cost over a period of time. Security generally given against assets acquired Immediate benefits – assets to grow the business now, reduced immediate cashflow burden. Potential availability of tax relief on assets acquired
Invoice finance Selling your debtor book or securing finance a line of credit against your debtor book Enables a business to obtain an immediate cashflow benefit now, rather than waiting for receipts under their usual credit terms
Trade / Purchase Order finance Funding supplier payments upfront based on confirmed orders This can allow a business to take on orders which fall outside of their normal trading cycle or capacity to fund.
Merchant cash advance Raising capital against future credit card sales Allows a business to grow by securing funding against existing revenue streams. Good for retailers to finance new outlets against revenues from existing ones.
Business Property Finance Raising funds to acquire commercial property until longer term finance can be sought. This can be development finance, commercial mortgages, or bridging loans Short term finance to allow businesses to act quickly in acquiring property rather than having to wait for traditional loans and mortgages to be approved.
Mezzanine Finance Finance where lenders prioritise the repayment of other debts in the event of default Can be a useful tool for businesses to raise finance where there is more senior debt already in place
Management Buy Out (MBO) Securing finance against the assets of the business for the existing management team to acquire the share capital of the business Useful where the MBO team has limited personal funds and the exiting shareholder is reluctant to offer significant deferred consideration.
Overdraft facility An overdraft acts like a financial buffer for businesses to spend beyond their existing account balance This can help businesses as a short term option to finance cashflow pinch points and can be valuable for seasonal or cyclical businesses in particular
Secured Loans Property or business assets are used as security to obtain finance Existing assets can be offered as security to allow businesses access to lower interest rates by reducing risk for lenders
Unsecured Loans Acquiring finance without offering security to lenders Useful for businesses who have a lower level of assets or are already used as security against existing finance
Peer to Peer P2P loans can be used for a variety of business purposes P2P lenders often offer better rates that alternative finance providers and can be quicker than bank loans

While the summary above might be lengthy, it is by no means exhaustive, but should provide a flavour of the opportunities open to business owners who are willing to take the leap and grow their businesses.

Across PKF Francis Clark, we have contacts with a number of finance providers, from high-street banks to alternative finance providers, peer to peer lenders and funding platform Capitalise (more on whom in part two of this blog), many of which have been and will continue to be present at our ‘Finance In’ events across the regions (see below). This, alongside recent research which suggests that businesses are four times more likely to be successful in a funding raise where their accountant has been involved in the finance raise makes your accountant a good starting point.

Finance in events

My colleague Andrew James is busy organising our 13th Finance in Cornwall event at which a range of debt providers and a couple of brokers will speak and be available for one to one questions during the event.

I will be at Finance in Cornwall to support Andrew, but also to get ideas for my second and the firm’s fifth Finance in the South West event scheduled for October 2019 – more details to follow.

For now…

Please contact me or your usual PKF Francis Clark contact to discuss your funding options.

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