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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