DISPELLING MYTHS ABOUT CORPORATE FINANCE

By Michael Cantwell, head of corporate finance at RMT Accountants & Business Advisors

Ambitious businesses that are looking to expand and develop tend to have a lot of things in common – an experienced management team, a robust business plan, products and/or services that stand out from the crowd and a determination to succeed, whatever the ups and downs of their growth journey.

They equally also often lack something that’s crucial to realising their potential – some or all of the capital required to make it happen.

It might be possible, depending on how much you need, to find the funds you require from friends, family or business contacts, or if you’re lucky, from your existing business reserves – but this often won’t be possible.

One of the other ways in which this missing money can be found is by working with venture capitalists and investment funds, who can provide the capital you require in return for an agreed proportion of the equity in your business or a capital return over a given period.

The process of getting money from these sources into your business bank account has been demystified to a degree by the TV success of Dragons’ Den and its even more dramatically named US equivalent, Shark Tank.

But despite this, a surprising number of management teams aren’t properly aware of the opportunities that working with fund managers could offer them, nor of the way in which they should be approaching obtaining the investment that will help them move their plans forward.

There’s probably never be more opportunity for growing businesses to access investment capital, whether from providers inside the region, such as the North East Fund and the County Durham Growth Fund, or increasingly from elsewhere.

Fund holders across the UK have become increasingly aware of the North East’s commercial strengths, particularly within our thriving technology sector, and our experience tells that they’re keen to find out more about what our expanding businesses have to offer.

This widens the field in terms of the number of options that you might have for finding the investment you need, and it’s important that you take the time to research these options before deciding on which ones are most suited to your particular requirements.

They all have individual personalities in terms of the sectors on which they focus, their attitude towards risk, the amount of money available and the stages of development at which their target businesses currently are, from pre-launch and early-stage through to growing SMEs and mature companies.

Working with your professional advisors to decide what the right options will be for you and how you should shape your approach to them will give you the best chance of achieving your goals.

Each potential investor will want to know the capabilities of the management team that will drive the implementation of the business plan in which you’re looking for them to invest, as well as the workforce that will deliver it on a day-to-day basis.

Do they have the collective credibility, knowledge, skills and determination to turn what’s on paper into something more tangible, exactly how will they do this and how will venture capital involvement make success more likely?

Can you show that your people and/or your business have achieved their commercial objectives in the past, how this experience is going to be used to make similar success more likely in the future and how you differ from the competition?

The actual process of presenting your ideas to potential investors will most likely be rather less melodramatic than the pitches we see on Dragons’ Den, but you’ll most likely be pressed just as hard on the credibility of your forecasts and ideas, so the more detailed planning, preparation and research you do, the more likely you will be to succeed.

For further information on all aspects of securing outside investment and all aspects of corporate finance, please contact Michael Cantwell at RMT Accountants & Business Advisors on 0191 256 9500 or via michael.cantwell@r-m-t.co.uk.