Finance in Cornwall 2014 follow up

events

19 November 2014

Peer to Peer /

Crowdfunding

debt from an

SME perspective

P2P for SMEs:

introduction (including some housekeeping..)

Richard Wadman – Corporate

Finance Director

www.francisclark.co.uk

Speakers and topics

• Overview of alternative

funding market

• P2P the approach

• Practicalities

• Experiences

• Investor Ready

• Types of debt

James Gibbs

www.francisclark.co.uk

UK Alternative Finance Industry

• The UK Alternative Finance Industry Report 2014

• Different models (pg 8)

• 44 facts… (pg 10)

• P2P Business Lending (pg 28)

James Gibbs – Funding Circle

November 2014

5

Agenda

• Welcome

• Banks Vs. Peer-to-peer

• Funding Circle and its background

• The loan & Process

• Criteria

• Case studies

• Questions

A reminder of peer to peer lending

Traditional lending

Peer to peer lending

Funding Circle

P2P - A Structural Advantage

Traditional Bank Lending Funding Circle

6

State support for Peer-2-Peer lending

• £20m lent by UK government through FC in 2013

• £40m committed by UK government-backed

British Business Bank to lend in 2014

• 10 councils & universities committed £3.7m to

lend to local SMEs

• Formally regulated by FCA since 1st October 2014

• Funding Circle one of the Government’s “Future

50” companies

9

3 Founding Members –

set up in 2009

Over £420m lent

150+ Staff in the UK

US office now has over

50 staff

Aim is to become the

global market-place for

investing in and

borrowing for SMEs

(as of November 2014)

Funding Circle – Who are we?

Index Ventures

Union

Square

Ventures

Accel

Partners

10

Unsecured Loan

Unsecured loans £5k - £200kSuitable for a wide

range of purposes

6 months to 5 year term

Rates from 6% (8.3% avg A+ over 36 months)

Fees between 3-4% of loan amount

No ERP’s

Secured Loan

£150k - £1m

All asset security agreement

Charge on specific properties or assets

Types of borrowing

11

£150k-£3m

Development

Commercial

Investment

Fixed interest rate

No early repayment fees

Circa 8% pa.

Property Finance

Recap: Funding Circle borrowers use their loan

for many reasons

Refurbishing premises

Expanding to a new office

Recruiting and training new

staff

Working capital to help with seasonality

Buying stockPaying down

debtMarketing campaigns

Research and designing new

products

Paying tax liabilityFunding insurance

premiums

Deposits for equipment, property

and assets

Capitalise on growth opportunities

Our borrowers

Funding Circle business loans by sector Funding Circle business loans by region

9

London

North West

South East

North East

Scotland

East Anglia

Midlands

Northern Ireland

South West

Wales

Automotive

Finance

Leisure & Hospitality

Education & Training

I.T and Telecommunications

Agriculture

Consumer Services

Healthcare

Manufacturing and Engineering

Other

Professional and BusinessSupportProperty and Construction

Retail

Transport and Logistics

Wholesale

14

The Process

• Prequalification

• ApplicationApplication

(1hour)

• Background Checks

• Underwriting

Underwriting (48hrs)

• Listing

• Acceptance

Market Place (10 days

Max)

15

The marketplace

• 7 Day Listing Period

• Can be ended early

(once 100% funded)

• “Reverse e-bay” style

bidding process

• Average rate across

all bids given to

borrower

• Fees can be repaid

over the agreed loan

term

16

Minimum unsecured criteria includes

Limited companies, limited liability partnerships & non limited

Established: trading for 3+ years with at least 2 years of filed

accounts

Directors: A good credit history – no CCJs, CVA, CVL or liquidated

companies within past 6 years. UK resident.

Company: Min turnover £50,000, sufficient P&L strength to service

the additional borrowing. Upward growth trend and no consecutive

losses.

Beneficial ownership in UK

Loan supported by PG

17

18

Investor

readiness

Richard Wadman – Corporate

Finance Director

www.francisclark.co.uk

Investment ready

www.francisclark.co.uk

The Readiness Process

• When, why and what funding is needed

• Communicating the business proposition -

Business plan and projections

• Viable plan and credible management

• Compliance (VAT and IPR etc)

• Identifying and Building the relationships (pg

28)

www.francisclark.co.uk

Investment Readiness: The Business Plan – A Guide

• Executive summary

• The Business –history and present: Where you are now, including

historic financials, ownership, awards, accreditations etc.

• The market and the opportunity

• Future strategy/ plans/ risks

• Operations (changes + practicalities)

• Financial – summary of projections

• Finance required

• The team

• Environment, Equal Opp and Local Economy etc - Depending on the

type of finance sought may have to consider these issues

The opportunity and how you

will exploit it. Why you will

succeed.

Financial implications

and finance required.

www.francisclark.co.uk

Investment Readiness: Projections – “How to”

• Excel and/ or Sage Winforecast (other programmes)

• Approach

• Annual P&L to Monthly P&L

• Cash flow assumptions

• Capital expenditure (profile)

• Other non-P&L items e.g., loans

• Opening balances

www.francisclark.co.uk

Investor readiness: Debt

• Term?

• Security

• Serviceability

• Loan to value – value?

• Covenants

• Personal Guarantees

• Debentures

• Overdraft

• Term Loan

• Asset backed

• Unsecured

• ID/ Factoring

• Stock finance

• Mezzanine

www.francisclark.co.uk

Investor Ready - Conclusions

• Appropriate funding / understand

the funder and their requirements

• Business Case:

• Funding to fit with

• Presentation of is key

• Should override emotions?

• Know the ‘deal breakers’ / Plan B?

• Build in extra time

www.francisclark.co.uk

Business support

Get Set for Growth

Growth Accelerator- Mentoring / 7 days coaching

- Companies with 1-4 employees – £600 plus £700 VAT

- Companies with 5-49 employees – £1500 plus £700 VAT

- Companies with 50-250 – employees - £3000 plus £700 VAT

- Leadership (subsidised assistance with projections for example, £2k per member of management team)

Growth vouchers- 50% subsidy up to £2k for advice on:

- Managing cashflow, late payments and negotiating finance

- Developing skills and taking on staff

- Improving Leadership and Management

- Marketing, attracting and keeping customers

- Making the most of digital technology

www.francisclark.co.uk

Francis Clark – who are we?

• 7 regional offices: Taunton, Exeter, Torquay, Plymouth, Tavistock,

Salisbury and Truro

• UK Top 25 Firm (Accountancy Age 2014)

• 49 Partners and over 390 staff

• Identified in December 2013 by the London Stock Exchange as one

of the ‘1000 Companies to Inspire Britain’

• Largest range of specialists located in the South West

• Awarded ‘Best VAT consultancy’ at the Taxation Awards 2014

• Awarded ‘Tax Award of the Year (non global firm)’ in the British

Accountancy Awards 2012

• Awarded ‘Best Tax Practice in a Regional Firm’ at the Taxation

Awards 2012

• Awarded ‘Auditor of the Year – Mid Tier’ at the national Financial

Directors’ Excellence Awards 2011

www.francisclark.co.uk

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