The SME funding landscape in the North East has been dominated by the Finance for Business North East funds over the last five or six years. These funds have played an important role in both supporting new businesses and providing access to growth capital and working capital funding to more established businesses. It was therefore fantastic news when a top up to these funds was confirmed last month.
The five fund managers have £17m to invest in over 100 North East SMEs before the end of 2016. We are seeing a strong appetite to access this funding and have a number of clients who are progressing an offer of funding. With progress being made towards a new £120m fund for the North East LEP area, which should commence in 2017, these funds will remain a key part of the funding landscape in future.
Venture Capital Trusts have long been part of the equity funding landscape in the UK. Significant changes were announced in the 2015 Budget for VCTs. These changes came in force this year and have changed the types of deals those funds can invest in. In particular, VCT funds can no longer fund MBOs, which had been the focus for a number of VCT funded investment businesses and cannot invest in businesses over seven years old. This has seen the investment focus of these funds shifting from backing MBOs of established businesses towards growth capital investment in younger businesses – a big change in strategy for a number of providers. We are already working on a number of growth capital deals with investors who historically would never have considered the opportunity.
Outside of VCTs, Business Growth Fund have been very active investors in the North East over the last couple of years and retain a strong appetite to invest in successful North East businesses.
Bank funding remains a hot topic of discussion amongst many business owners – though the major banks are all lending money to businesses and suggest that demand amongst SME businesses isn’t there to take on debt.
We have found that there has been a willingness from banks to support transactions, though caveated with suitable security being in place in most instances. Asset finance and invoice discounting has been an increasingly common part of the funding mix in deals we have completed and can be an effective way of raising finance to support your business.
Help from the tax system
The tax system is an often overlooked source of funding for many businesses. Current government policy is seeing the focus on public sector support shift away from grants to using the tax system to incentivise business investment. A great example of this is the R&D tax credit. Tait Walker’s R&D tax team have helped clients benefit to the tune of £25m through R&D tax credits over the last five years.
We have helped a number of businesses raise funding in the last twelve months, including Atlas Cloud and Furniture Clinic. We are currently working with several businesses looking for everything from seed capital to multiple millions of growth capital.
Our Corporate Finance team will be running a seminar in the autumn on the North East funding landscape, but if you want to speak to someone about funding opportunities now then please get in touch.