20 corporate recovery


An innovative approach to funding for small businesses


In a marketplace where securing funding for the acquisition of small businesses in the sub-£5 million category is like finding the proverbial hen’s teeth, having a business adviser with the right connections and support is essential


Whitley Stimpson, chartered accountants and business advisers, with offices in Banbury and High Wycombe, is just such a practice.


Corporate finance partner Tim Wallbank says a growing number of cash rich business angels are stepping into the space in the smaller end of the market that the venture capital firms have moved out of, and it’s important to know where to find them.


“It’s clear that there’s a two-tier society developing, the big deals are still taking place, especially in growing areas such as IT, pharma and healthcare, where venture capitalists are replacing the banks in the debt arena. However, it is the smaller guys who don’t happen to be in the ‘right’ sectors who are struggling,” he said.


“That’s why being plugged into the business angel network, knowing the right people who are willing to invest between £200,000 and £0.5m in developing smaller or start-up businesses, is really important.


“Business angels are now becoming involved in the debt and equity market and, if you know where to find them, it may be the answer to securing the equity you need to grow. A good business adviser is really important when it comes to helping find sources of funding and taking an innovative approach to help clients is something we do well.”


Wallbank says the practice is regularly asked for advice on refinancing and the team’s expertise enables it to suggest what he describes as a “cocktail” of asset-based lending, borrowing against land, equipment and the debtor book, as well as vendor funding.


On the plus side, he says other clients are still on the acquisition trail, keen to grow their own businesses more quickly than the organic route allows.


“We have clients looking for strategic acquisitions at the right price which fit in with their existing business portfolio, and we are well placed to support them in refinancing and acquisition services and getting the deal done,” he added.


Tim Walbank


Since its merger with Hale Partnership nearly two years ago, the practice has continued to expand, with Owen Kyffin being promoted to tax partner.


Whitley Stimpson offers a full range of advisory services, including buying and selling a business, MBOs and MBIs and Wallbank says further expansion is planned for 2012.


Details: Tim Wallbank 01295-270200


tjw@whitleystimpson.co.uk www.whitleystimpson.co.uk


Tough times just keep rumbling on


Small and medium-sized businesses in the South East have little to cheer their spirits as we approach the midway point of 2012, writes Matthew Wild, partner in the restructuring and recovery group at Baker Tilly


Only 36% of respondents from the South East to Baker Tilly’s Outlook 2012 survey reported feeling confident about their business prospects for the year, and only 11% are optimistic about the economic outlook of the region.


36% of the respondents to the survey do not expect to increase sales, gross margins or profit this year. This echoes the findings of earlier research in autumn 2011, which found that almost a quarter of SMEs across the UK saw a drop of over 50% in gross profits, and more than a quarter saw sales fall by 10% or more.


Costs are a growing worry for businesses. In 2011, around a third of respondents to our survey were worried about direct costs. By 2012, this number has more than doubled to 69%, driven by the rising price of essential items such as fuel, utilities and certain raw materials. Fragile demand means that businesses are unable to pass these costs down to the end user as they have done in the past.


For some healthy businesses, it could be www.businessmag.co.uk


an excellent time to snap up struggling competitors. But for most, the squeeze on profits and costs makes it vital to manage their working capital as efficiently as possible. Businesses often measure debtor days, but invoices may not actually be sent out until several weeks after the actual activity that generated the sale – which means cash is not generated as quickly as it could be. By being prompter and more rigorous on invoicing and debt collection, many businesses could significantly improve their working capital.


Some businesses may be tempted to sacrifice profit margins in the pursuit of sales, in an attempt to keep cashflow moving. But in an environment of constantly increasing costs, it is an unsustainable approach. Although cashflow may hold up in the short term, the falling profit margins leave companies with less and less headroom to cover increasing costs.


Given the double whammy of falling sales and profits, businesses are understandably focusing on servicing debt rather than applying for more lending. Our Outlook


THE BUSINESS MAGAZINE – THAMES VALLEY – JULY/AUGUST 2012


2012 survey shows that almost one-in- four UK SMEs has a liquidity ratio of less than one, indicating they have insufficient resources to meet short-term debt and payable liabilities, and are therefore understandably reluctant to add to their debt burden.


A wise approach, but for many businesses it may be too little, too late. Although the latest figures show that overall insolvencies have remained largely static compared to the same period last year, it may not last. Banks have so far been reluctant to ‘pull the trigger’ on struggling businesses. But as banks regain some stability and other creditors, like the HMRC, begin to take a tougher stance, an army of ‘zombie’ companies may be forced over the edge in 2012.


Details:


Matthew Wild 01483-307000 matthew.wild@bakertilly.co.uk


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