Rounding the Circle - Later stage funding for established businesses

Scale-up funding 

The scale-up phase is reached when the business feels confident in its foundations and market proposition, and money is needed to invest for expansion and scale. At this point, brokers can suggest a greater range of funding options to support the costs of opening additional sites, investing in new technology, expanding production capacity, growing the salesforce and seeking out acquisitions to fast-track growth. In addition to debt funding, Venture Capital Trusts or Regional Growth Funds are viable options for equity investment which will dilute owners' shareholdings but not place additional financial obligations on the business. Often, a combination of debt and equity works well at the scale-up stage. 

Exit stage funding 

Once a business has reached maturity, owners will often look to exit, either in full or in part. In our experience, particularly for small businesses, the exit manifests in a variety of forms; as a sale, a merger or an acquisition. Often, the owners will often look to exit through a sale of their shares. Two popular options are selling the shares to a private equity investor who has the expertise and capital to take the business to the next level or selling shares into an Employee Ownership Trust for the benefit of the staff. In both scenarios, the business is typically able to borrow a material percentage of purchase price, reducing the amount of equity required. High growth companies may also choose to go public, particularly on the alternative investment market (AIM market) as it caters to smaller businesses and allows them greater access to capital from the public market. 

High street banks vs specialist lenders

Whilst it is important for brokers and their clients to consider the types of finance available, it is equally as important to think about the main objective or purpose of the funding, and whether flexibility or cost are the most important factors. Most high street banks will offer a variety of products and services including variable rate or fixed rate loans, business accounts and even offer additional benefits such as access to business advice or support with international expansion. However, these banks also tend to have strict criteria which can make it difficult for small business owners to get access to the finance they need if they sit outside of the standard risk model - even if they have a really interesting story to tell. This is where exploring finance facilities from a specialist lender can add value. Specialist lenders tend to be very flexible in the way in which they can provide facilities, working with a business to really understand its needs and providing a tailored solution that is right for them. Their relationship managers will typically have fewer clients than a high street bank counterpart, which allows them to spend more time understanding the ins and outs of a specific business. This means complex cases can benefit from the increased attention, making it much easier to secure the right type of finance and importantly ensure support continues through the life of the loan. 

Commercial finance brokers step forward 

No matter which type of finance or funding provider is chosen, understanding the financial options available can help optimise the way cashflow is managed, ensuring that the business can continue to grow. One thing we see in a lot of owner-operated businesses is that owners are talented in their specific fields, but may not be as well versed in finance, which can hinder their businesses growth. Obviously, that is where commercial finance brokers play a key role, carefully considering the wealth of options before selecting and proposing a facility that caters to each client's circumstances and the growth potential of the business.

“Owners are talented in their specific fields, but may not be as well versed in finance, which can hinder their businesses growth. Obviously, that is where commercial finance brokers play a key role”