Guest Column: Raising finance for business, by Janette Pallas

As Business Ready Programme Manager at University of Warwick Science Park, Janette Pallas supports businesses to achieve their next level of growth.

It is a role to which she brings considerable experience and expertise, having received a Queen’s Award for Enterprise Promotion for her work in supporting early-stage and growing businesses.

Here, Janette explains what is involved in growing your business - and the breadth of advice and support that is available.

As an experienced Business Growth Adviser, I have been lucky to work with a wide range of ambitious and capable high-growth businesses, particularly in the technology sector.

My experience of working with growth businesses is that when they have a strategy or opportunity for growth they usually need an injection of cash to support that growth - for new staff, equipment or premises.

To secure this, there are a variety of possible sources including grants, asset finance, loans and equity investments. But, while many business-owners know that their businesses are trading well and ready to grow, they don’t fully understand the time it takes to raise funding - and the need to be ‘investment ready.’

One thing is certain - you won’t attract money unless you do your homework; it takes time and effort to secure finance. Running a small business at the same time as raising finance is demanding but, with proper preparation and by approaching the right finance-providers, you’ll have a better chance to raise the funds you need.

How do you do this? Start with a growth plan and, ideally, a full business plan. A well-thought out strategy for growth, along with full cash flow and profit-and-loss forecast, will be necessary for a funding-provider to understand the risks and rewards of funding your business. 

You will also need to have all your business ownership documents (eg. shareholder documents) in order and copies of the latest audited and management accounts.

Identifying the right type of funding is important. For example, debt providers such as banks will look for security and the ability to repay the debt. Equity investors, on the other hand, will take greater risks but expect a higher return when the share is sold.

A new business with little track record is riskier than an established business and some sectors may not be funded by your preferred provider or bank. The higher the risk in funding your business, the greater the cost is likely to be, in terms of higher interest rates or a greater share to be sold.

Typical business grants are geared towards creating jobs or taking new products to market. You will need to ensure that you meet the requirements of the grant provider.

For example, many grants, such as the Warwickshire County Council Capital Growth Grant - Small Capital Grants - are only for capital equipment purchases and are limited to Warwickshire-based companies. Business grants also require ‘match funding’ whereby if the funder provides say 40% you will be required to invest the other 60% from your own or other private funds. Also, most grants are paid retrospectively, so you will have to pay for the goods or services, then claim the grant.

An ability to manage cashflow through this process is essential and must be demonstrated in your grant application.

Remember to always read the guidelines and small print from any finance provider before going through their application process. A lot of time can be wasted in applying for a grant or loan where you don’t meet some of the eligibility criteria. Or, later, you could get caught out by unexpected repayments or potential clawback for spending the money in a way that wasn’t the intended purpose.

Through my current role managing the Business Ready Programme for the University of Warwick Science Park, we support technology-based companies to achieve their next level of growth by providing advisory and mentoring support to access finance, skills, knowledge and new markets. The project is part-funded by the European Regional Development Fund, forming part of the Coventry & Warwickshire Business Support Programme. If you are a technology business based in Coventry or Warwickshire, and are looking to grow the business then we would love to hear from you on businessready@uwsp.co.uk or 024 7632 3121

The Business Ready project is receiving up to £1m of funding from the England European Regional Development Fund as part of the European Structural and Investment Funds Growth Programme 2014-2020. Established by the European Union, the European Regional Development Fund helps local areas stimulate their economic development by investing in projects which will support innovation, businesses, create jobs and local community regenerations. For more information visit https://www.gov.uk/european-growth-funding.