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Raising Finance: A blog by Connect Yorkshire CEO Nick Butler

11th August 2017

At the end of July we held a great Training Seminar in Sheffield on Raising Finance delivered by our South Yorkshire Accountancy Partner Steve Knowles of Knowles Warwick


This blog will cover what you need to do to raise finance. The types of finance and the institutions that provide it are covered in my previous blog; Finance Options


Important Facts


Only 2% of efforts to raise equity succeed


Only 12% of people presenting at Dragons Den actually do a deal


Equity providers expect 25% to fail, 40% to be “walking dead” /breaking even, 25% profitable and 10% successful.


You should expect to pay 3-4% of money raised in arrangement fees and costs


In your business plan include graphics and videos-and limit it to 10 pages.


Elementaries


Every financier wants to know “How much do you want, what are you going to do with it and when am I going to get my money back”


How much do you want


The amount you will get will depend on the value of your business and the amount of equity you are prepared to release. This subject will be covered at our Training Seminar on 28th September see here.


What are you going to do with it


The typical uses of the money are developing new products or services, diversifying into new markets, starting to sell overseas, investing in new people, funding an increase in sales or securing lucrative suppliers or customer contracts.


When am I going to get my money back


This brings us to “Deal Structures”. Overdrafts and term loans from your bank are usually straightforward. Here we are talking about some form of equity investment; an equity stake is when an investor exchanges money for shares in your company.


You can issue new classes of shares with different dividend or voting rights (or none at all) or that will be paid back at a future date and/or if certain events occur.


Many equity investments involve both an equity stake and a convertible loan which entitles the holder to convert into equity at a future date at a fixed or variable price set out in the documents.


Term Sheet


This is a non-binding agreement setting out the main terms that have been agreed. Once signed the investor will carry out due diligence and legal agreements will be drafted. The term sheet should include a target completion date which can be several weeks, or even months away.


Conclusion


Prepare a business plan

Identify weakness in your business

Rehearse a sales pitch

Identify most suitable funders

Make sure what structure you want

Allow for headroom ie not hitting your targets

Keep your eye on the ball – ie your business


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