There are many successful businesses which have continued to grow through the financial crises of the last few years Some may not have grown as quickly as they would have liked due to the lack of suitable funding. Other businesses, with great ideas, but who didn’t have cash reserves to fund growth may have been stifled due to lack of support from traditional sources such as the banks.
However, necessity is the “mother of invention” as they say. The difficult financial conditions, have led to other innovative funding solutions springing up in the domain that once would have been dominated by the banks.
Help for growing your business is also at hand from government agencies which are involved in supporting and helping to grow specific industry sectors. This may be in the form of grants, loans or in-kind support. In this article, we will provide a flavor of what type of support is available and the alternative routes to funding which may be available to you, even if your not so friendly bank manager has said no.
As a busy business owner, time is probably your most scarce and valuable commodity, so we have provided a couple of links to government agency sites which you may find useful. The first is for Creative Scotland http://www.creativescotland.com/funding. There are various categories of support available, but two which we have picked out are for Innovation and Professional Development.
The innovation awards are targeted at companies in Scotland which are using digital technologies which interact with film, music, publishing, visual arts or other creative industries. Support is in the form of interest free loans and awards can range from £10,000 to £75,000.
The professional development support is targeted at individuals, but applications can also be made from organisations on behalf of individuals. The funding is aimed at helping individuals to develop their skills or professional practice through specific activities. Examples would be attendance at conferences and seminars, structured technical skills development and attendance at workshops or master classes. The support is in the form of a grant and is likely to be in the £1000 to £5000 range.
Skills Development Scotlandhttp://www.ourskillsforce.co.uk is another agency which can provide support for training. This is not industry focused but is only available for businesses with 100 employees or less. The support is in the form of a grant which is used to cover 50% of the training cost up to a maximum of £500 per employee. The maximum which can be claimed is £5000.
The above support is often available on a financial year basis and is limited, so once it has been allocated to projects there may be no further opportunities, if funding is not renewed in the following year.
Scottish Enterprise also provide help and support. Although they may not be able to contribute cold hard cash (although depending on the project, sometimes they can), they can provide a range of other support services which can help you capitalise on your idea. For instance, they have a research service where they can help you with market research and competitor intelligence. If you want to find out more of what is available, the following web link is a good start http://www.scottish-enterprise.com/your-sector/creative-industries/services/new-products-and-services.aspx
The banks are prepared to lend, but our experience is that you need to demonstrate a very good business case and that they are more risk averse. Added to that, the costs of funding have increased substantially from the boom years.
However, the banks aren’t the only source of funds. In recent years, crowd funding has sprung up with sites such as Kickstarter. But not everyone wants to give away equity. There are now debt funding sites which are working in a similar way to crowd funding, but providing debt rather than equity. Their selling point is that they will take a more rounded view of a business proposal than the banks and are more inclined to say yes. That doesn’t mean they are a soft touch. You will still need to provide a robust lending proposal and probably security. Their costs are typically higher than the banks, but due to the increasing costs of bank funding, the differential may not be as high as you think. One such lender is Ludgate Finance via its platform ThinCats.com. You can find out more at http://www.thincats.com/wa/1/101/4854-Ludgate-Finance.html.
There are also other lenders out there. Often these are regionally focused such as the West of Scotland Loan Fund, or have an eligibility criteria. PSYBT for instance, will look at loan finance for the 18-30 age group.
If you put away funds in your pension scheme in the good years, you may now have an untapped asset. Although under normal pension rules you cannot access the funds tax free until you are 55, there are specialist companies which can help you free up some of your pension scheme pot to provide an alternative source of funding for your business. It’s important to use a reputable provider who ensures that the relevant HMRC rules are met.
If you are involved in software and / or technology then it may be possible to free up cash through claiming R&D tax credits. Often business owners dismiss this, as they don’t have any “white coats” doing research. However, this doesn’t mean that your business isn’t undertaking eligible activities. The key criteria for a successful claim are scientific or technological advance, ie. the work must try to make something better in a measureable way and scientific or technological uncertainty i.e. there must be an element of doubt or risk as to whether the project aims are technologically feasible or achievable. Failure is classic proof that the company is doing some sort of R&D. The tax credits are used to reduce your corporation tax bill, thereby freeing up cash for new projects. Or, if your company has made a loss, you can exchange your R&D tax losses for cash from HMRC!
So, hopefully you will agree it is not all doom and gloom. If you are in the process of growing your business, we would be delighted to speak to you and help out where we can.