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Options for funding growth that will maximise the potential of your business

Nick Steel — 02/10/2017
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So, your business is either ahead or on plan but you know it has is much greater potential. However, you also know that to accelerate the growth of your business you will need additional investment in capital equipment, premises, people, IT systems or most likely all the above.

Whilst the business may be generating a good level of free cashflow it will probably take a long time for this to generate the level of cash that the immediate investment requires. Additionally, you feel that the opportunity for growth is right now and you don’t want to delay as it will let your competitors steal a march.

Many businesses face this welcome, if often challenging, predicament. So, where do you go to seek finance and who can advise you?

Banks historically have been the principle source of local finance, and whilst the crash in 2008 has meant they are more risk averse, a strong business with a good profitable track record is still likely to find that the bank is a good source of lending, be that any high-street bank or asset finance firm.

Lenders will naturally look to assess the historic strength of the cashflow, the confidence this gives them on how realistic the business’s future projections are and whether they need to seek additional comfort through security against company or personal assets. Banks tend to offer the cheapest form of finance and they won’t normally look to taking an equity stake in your business, so you retain full control.

If, however, the future growth opportunity is many times greater than the historic performance of the business, an alternative option may be to seek a suitable equity investor. Do not think of this route as a way of just getting a cash injection, instead, the most successful entrepreneurs think of equity investors as bringing ‘smart money’ into their business.

Along with the investment itself, the input that the individual or company investor brings can add additional value, advice and knowledge well beyond the £ cheque that they put into your bank account. For that expertise, guidance and of course cash they will want a good return and will usually get this from the potential ‘upside’ that the equity investment will bring.

Giving up equity is always quite painful for any entrepreneur but for ‘smart money’ it will pay dividends, literally, in the long run.

Any lender or investor you look to for help to fund your growth will expect to see a clearly articulated business plan. This will open the door for you, because it’s all about them believing the growth story and that you are the right individual with the right team to deliver on that opportunity.

At Jersey Business, we are here to help you develop your plan, acting as an independent sounding board. In addition, we have good relationships with a number of investors and banks, so do contact us for an appointment or browse our website.

Nick Steel - Head of Business Advisory Team
Nick is a member of the Senior Management Team responsible for Jersey Business's advisory team.