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Investment in smaller businesses in the East Midlands is on the rise

2021 was an exceptional year for UK equity finance, with investment in smaller businesses reaching nearly double its 2020 level at £18.1bn.

This is good news for businesses, as the country continues to recover from the impacts of the COVID-19 pandemic and tackles new economic headwinds.

Encouraging signs for the East Midlands

The British Business Bank recently launched its Small Business Equity Tracker for 2022, revealing an encouraging rise of investment in the region.

Smaller businesses in the East Midlands secured £154m of investment across 50 deals in 2021. This represented a 92 per cent increase on 2020, while the number of deals increased by 32 per cent.

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Tech is leading the way

The technology sector attracted the largest amount of investment in the East Midlands at £35.2m, up by 188% from £12.2m in 2019. From a low base, the number of deals are rising gradually across most tech sectors and it’s encouraging to see the value of deals increasing within life sciences, trebling compared to 2019 to £12.8m and clean tech increasing to £7.9m, from less than £100,000 invested in 2019. Across the UK, investment in environmentally friendly clean technology was worth £436m, up 38 per cent from the previous year.

Although this data signals investor confidence in the region, businesses outside of London, including in the East Midlands, are still underrepresented in terms of their share of equity finance.

Last year, 1,286 deals worth £11.9bn took place in London, representing 49 per cent of the UK’s total number of equity deals and 66 per cent of total investment – both a slight increase on 2020’s figures (three and one per cent respectively).

This was however due to stronger growth in London than the rest of the UK, rather than a decline in the activity in the other regions in 2021. The British Business Bank is working to identify and reduce regional imbalances in access to finance through a series of programmes to support supply of and demand for finance across the UK regions.

In the Midlands, our Midlands Engine Investment Fund (MEIF) has provided key financial support for SMEs throughout the East and West Midlands, with more than £150m of investment since 2017, with an additional £251m of private sector co-investment leveraged as a result of the MEIF’s work.
Our Regional Angels Programme commits funds for investment alongside business angels and other early-stage equity investors, acting as a catalyst to bring longer-term capital to smaller businesses with growth ambitions.

Commitment to smaller businesses

The East Midlands is a region of innovative business, covering a whole host of sectors that are striving for growth. The rising level of investment is a big indication of confidence in the area after the uncertainty and adversity they have faced over the past few years.

Smaller businesses will continue to be mindful of economic challenges in the coming months, the British Business Bank will be working to help companies looking to grow access the finance they need to succeed whatever the stage of their development

Information can be found, along with independent and impartial advice, on the British Business Bank Finance Hub – which outlines all the financing options available to small businesses.

By Dr Sophie Dale-Black

Source: The Business Desk

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Invoice Finance / Factoring – Case Study

The Client:

The client is a Freight Forwarder business and has traded as a Limited Company for the past 7 years, with a healthy turnover of circa £600,000 per annum.

The Scenario:

The client has had consistent cash flow issues due to their providing standard payment terms of 60 days to their customers for invoices, in addition to experiencing occasional late payments. Conversely the operating costs of the business, being predominantly wages, needed to be paid either weekly or monthly, therefore presenting an overall cashflow issue.

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The Solution:

The client was initially presented with several Business Loan options we managed to secure for them, although they ideally wanted a greater degree of flexibility in their borrowing. We therefore searched the whole market for an Invoice Finance facility for them as this was deemed the most suitable solution for their needs.

We managed to secure a £100,000 Invoice Finance Facility which will enable them to be paid advances on their outstanding invoices up to the facility limit over the coming year. The facility works with the lender deducting a set percentage as their fee, once the invoice has been paid by the client’s customers.
This solution and Invoice Finance Facility will greatly aid the client’s cashflow when they need it most and it won’t be restricted by any rigid monthly repayment terms.

Summary:

Invoice Finance / Factoring is designed to increase a company’s cashflow and fund growth. It is a relatively quick method for accessing business finance against a company’s account receivables.
Whilst personal and business credit may prevent access to Business Loans in some cases, Invoice Factoring Lenders are more focussed on the ability of a business’s clients payment history.
The facilities put in place are invariably Unsecured options which don’t require security over and above the invoices themselves, whilst also removing the time-consuming headache of chasing payments, since these now become the responsibility of the lending partner.

If you have any questions about Invoice Finance &/or want to receive a free quotation or advice, please call 03303 112 646 today. You can also fill in this short online form to get started. Our team of Invoice Finance Experts will get back to you straight away.

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Banks told to stop mistreatment of small firms struggling to repay their debts

The UK’s financial watchdog has ordered bank bosses to improve their handling of debts of small business customers, including emergency loans issued during the Coronavirus pandemic.

Responding to the surge in inflation that is placing consumers and small firms under increasing pressure, the Financial Conduct Authority (FCA) reviewed 11 banks’ management of SMEs in financial difficulty and found repeated instances of poor service and failures to treat customers fairly. This included “where relevant” the handling of government-backed pandemic support provided through the Bounce Back Loan Scheme (BBLS).

Failings included gaps in policies and procedures; inadequate staff training; systems and procedures that make it difficult to deliver fair outcomes; and poor record keeping. This led to breakdowns in identifying vulnerable customers, and inadequate provision of suitable forbearance options to those struggling with repayments.

The City regulator is now calling on the entire sector to rectify this, adding that it will take further action if problems continue.

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“We have written this letter to all chairs of retail banks with SME customers to make sure the issues we raise are given the appropriate attention at both board and executive level,” the FCA said. “We expect the board to ensure the issues identified are considered and, where necessary, addressed promptly.”

The FCA added: “Where customers have been adversely impacted as a result, we would expect your firm to put things right.”

The regulator said frontline staff were often not given training to deal with customers in financial difficulty yet were still required to decide on making a referral to a specialist team. In addition to staff lacking sufficient experience to correctly judge whether a referral was needed, there was also evidence of “staff not considering or acting on information provided to them by customers”.

There were also instances where referrals did not go through because of inadequate systems or procedures, resulting in a failure to receive specialist support or lengthy delays before support was provided.

“We continue to monitor outcomes and carefully scrutinise firms in this sector and will use our supervisory and enforcement powers to take further action as necessary,” the regulator said.

By Kristy Dorsey

Source: The Herald

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Starting A New Business: Best Ways To Raise Finance

Raising finance is one of the biggest challenges that many new businesses face. Moreover, if you have big plans for the future, you may even require additional funding. For example, this may be as simple as boosting production or an ambitious step, such as buying another company. Regardless of your goals, there are many different ways to seek funding, which don’t always mean you need to rely on traditional avenues, such as banks. The most appropriate funding option for you will be determined by your circumstances, including the size of your company and the nature of your growth plans. This article will find some of the best ways to secure financing for your new business.

Bootstrapping Your Business

Self-funding, also known as bootstrapping your business, is an effective way of financing, especially when you’re just starting out. It is common for first-time business owners to have difficulties securing funding without showing some traction or a plan for growth. As a result, many entrepreneurs invest from their own savings and ask their family and friends to contribute. This is normally easier to raise, as there will be fewer formalities and compliances to consider. Bootstrapping your business may be a good funding option if the initial requirement is small. However, if you need money from day one, you may want to consider other solutions.

Bridging Loans

Bridging loans can be used by businesses to cover their funding requirements in a variety of situations. They’re designed to be used in limited circumstances and typically in anticipation of a business receiving long-term funding. Advias is an experienced and reputable financial advisor who specialises in bridging finance, development finance, and premium mortgages. Thanks to their in-house analysis tools and extensive database of lender contacts, they can deliver accurate solutions in a timely manner. When it comes to starting a new business, bridging finance can help fill in the gaps and ensure that all necessary purchases can be made to kick-start the process.

Crowdfunding

Crowdfunding is a way of raising finance, which involves asking a large number of people to each invest a small amount of money. There are several different types of crowdfunding, including donation, equity, and debt. Donation crowdfunding means that people are willing to donate money to your enterprise simply because they believe in your vision and goals and will want nothing in return. Equity crowdfunding refers to people who invest in your business in exchange for shares and a stake. Finally, debt crowdfunding means that people lend you money, which they expect to receive back with interest.

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Credit Cards

Business credit cards are some of the most readily available ways to fund a new business, as they offer a quick way to get instant money. This may be a good funding option for you if you have just opened your business and don’t have many expenses. You can use a credit card and continue to pay the minimum payment. Nevertheless, remember that interest rates and costs associated with credit cards can build up very quickly. As a result, if you don’t use your credit card responsibly, you may accumulate debt, which can damage your business owner’s credit.

Business Grants

Your business may be eligible for a small business grant, which can help you cover certain types of expenditure. Take a look at the business finance support, that is available for start-ups and other small businesses. It can cover things such as the cost of premises, IT equipment, and machinery. Each grant will require a different application process, including strict qualification criteria. While there is no guarantee that you’ll be eligible, it’s still worth exploring your options, especially if you have just started a new business.

Angel Investors

Angel investors are typically high-net-worth individuals who invest in businesses during the early stages of their development. Usually, investors use their disposable finance to provide equity finance to a company. In exchange, they will normally take shares in the business and express an active interest in the company’s growth. Therefore, they must believe in the business and in you. In addition, angel investors will support you with their knowledge and expertise so that they can see a strong return on their investment within three to eight years.

Venture Capital

You may consider a venture capital firm if you need a serious amount of money in exchange for a big percentage of your company. However, this is a competitive area, so you will need an outstanding strategy, as well as a great business plan and an impressive pitch. In general, a venture capital investment may be suitable for small businesses that have moved past the start-up phase and are already generating revenue. Keep in mind that this may not be the best option for you if you’re not interested in mentorship and compromise.

By Sam Allcock

Source: Business Mole