Enterprise & Innovation
Feature
It’s essential for a business to get its finances in good shape
bringing an investment partner on board or using equity funding. There are some key things that businesses in the Midlands need
to consider. Time and time again we’ve seen management teams charge their business up with debt when it’s not quite right for them. It can often restrict growth if the financing structure isn’t aligned with long-term plans. If the debt facility isn’t sized to grow with your business – or some financial covenants impinge on investment plans - then in the short-term your business could find itself needing to refinance. This can be a sticking point for management teams looking to
grow as they are restricted by the amount of debt they’ve taken on. Corporate strategy should dictate financing and not vice versa. There is currently a lot of liquidity in the Midlands market looking for a good home, so businesses should be confident when looking to secure the financial support necessary to fuel expansion.
Seeking external investment Private equity is also an option to use in conjunction
with debt. Taking shares in the business and instilling a board representative at non-executive level is a tried and tested tool for achieving growth. The added benefit of bringing additional people to the boardroom table is their expertise in a given field. It can be an especially beneficial route if a business is looking to enter foreign markets or undertake a spree of acquisitions. Often many private equity funds also have access to
follow-on finance which sits outside the original investment package. This can be used to drive continued growth after the initial point of investment. The relationship with a private equity investor generally takes a longer lifecycle given they are looking to achieve a return on their investment it means partnerships can last for a number of years. External investment can also take other forms. For more early
stage and start-up companies there are alternative methods of financing growth, like crowdfunding. Bypassing traditional banks and turning to individual investors who pledge smaller sums of money towards a business can be a good tactic to raise capital, but often the sums of money aren’t substantial enough to fund a long-term expansion plan.
Getting investment ready For any management team looking to secure investment in
the region – the requirements are clear. Formulate a business plan, make sure your financial forecasts are watertight with detailed expectations of profit and loss, as well as balance sheet and cashflow projections. It’s the role of an advisor to help design and develop an investment strategy, plus scrutinise that plan to ensure it is
investor-proof. Often seeking external investment can be daunting so getting the right support will enable you to make the best long- term decisions. Gearing up for growth requires preparation, but by getting your house in order early on, your business will be investment ready when you’re ready to push the button.
October 2019 CHAMBERLINK 63
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