Funding for small businesses: A wealth of ideas
Posted: Fri 15th Nov 2013
Every month, we take some of our members to 10 Downing Street to meet with special advisor Daniel Korski (@danielkorski) to talk about issues affecting small business owners in the UK. Last week, the topic was fundraising and access to finance - and the discussion was as lively as ever.
The group of 20 small business owners included those who've raised capital from angel investors, via crowdfunding and retail bonds, a business growth fund and bank loans. Based on their own experiences, they had a few ideas for Daniel's attention:
Carol Lovell of Stow London secured funding for her luxury travel brand on Kickstarter, and suggested the government should consider match-funding contributions made from crowds via these powerful funding platforms. Daniel confirmed that the Funding for Lending scheme is now distributing capital via websites like Funding Circle and Zopa to ensure more money reaches the growing businesses that need it.
Ben Ramsden of Pants to Poverty chose social enterprise crowdfunding website Buzzbnk to raise money and called for greater recognition to be given to the social output of businesses.
Tom Ball of Neardesk and James Clark of BVCA agreed that a new form of SEIS relief for big businesses could be the move that's required to unlock Â£488bn sitting on the balance sheets of UK corporations. James recently authored a report (PDF, 6.2 MB) outlining the potential of this move to enable big corporate funds to flow more readily to young entrepreneurial upstarts.
Chris Book of Bardowl raised funds for his audio book business through angel investors and says SEIS (Special Enterprise Investment Scheme) was a great help, but fears for a 'Valley of Death' where SEIS funded businesses reach the stage of requiring a next series of investment and find it's not so easily available.
Rupert Lee Browne of Caxton FX turned to his own customers when he needed capital to expand, and issued a retail bond where customers lent the business the money it needed and were paid back with interest. What this deal raised is the potential for standardisation of legal and accounting contracts to enable other small businesses to pursue alternative sources of funding.
Another option, claimed Rob Drake-Knight of Rapanui Clothing is to turn to large foundations and charities, with Rob's own experience having been to raise funds from Unlimited's Big Venture Challenge.
Santiago and Felipe Alviar-Baquero are brothers who started Kent's most popular soft play area Tiny Town, and it was to the bank they turned. "It was relatively straightforward," said the brothers. "But we were asked to put up personal guarantees."
Fraser Smeaton's Morphsuits empire has benefited from an injection of capital from the Business Growth Fund with Fraser suggesting it was straightforward, as he and fellow founders gave up jobs in banking and accounting to follow their entrepreneurial dream, so have contacts in and knowledge of the fund-raising sector. Oliver Sidwell agreed. "It's not about the money," said the co-founder of the highly successful RateMyPlacement. "It's about the people. If you can surround yourself with people who understand what it takes to raise money, the process becomes a whole lot easier."
This was music to the ears of Jim and Susie Cregan, the brother and sister duo growing Jimmy's Iced Coffee and on the look-out for funds, with little time to spare.
In summary, match-funds for crowdfunding, SEIS for large corporates, standardization of legal and accounting processes, a single website with details of all alternative sources of finance, and matching entrepreneurs with funding experts and advisers is the way to go to ensure businesses achieve their full potential to grow.