Andrew Feeke, MHA Moore and Smalley: Funding your future

Ensuring a fast-growing business has the necessary funds to expand is key, especially if they are emerging from a period of low turnover or experiencing exponential demand growth, as the UK pivots to a virtual world through the pandemic.

According to Andrew Feeke, corporate finance partner, MHA Moore and Smalley, there has never been more cash available to fund growth than there is at the present time, albeit this can be more challenging for businesses in the early stages of their lifecycle. Andrew discusses the different options for scale-up businesses over the coming months.

With the economy focused on recovery, many UK businesses will be looking to return to steady growth through the second half of 2020. For the vast majority of these firms – increased revenues are likely to mean increased costs to serve a bigger customer base.

This is coming at a time when staff are returning to company payroll from furlough and market conditions are inflating the price of goods, including disposable items such as latex gloves, which companies in certain sectors now need as part of their manufacturing or service provision.

For many businesses, particularly those looking to grow quickly, an assessment of working capital to trade out of the recent downturn or capitalise on new market opportunities will be required, and companies will need to evaluate whether external funding is needed for the coming months.

For those who do need finance, there is, generally speaking, more ‘cash’ available now than ever before for strong businesses which have adapted quickly and can operate profitably in the current trading environment.

Most high street banks are currently prioritising the Coronavirus Business Interruption Loan Scheme (CBILS) for funding requests, but due to the high demand, have focused on their existing clients. CBILS is currently due to close at the end of September so there is a narrow window of opportunity for companies to access significant sums of Government-backed funding quite quickly.

In addition to other forms of commercial lending – ambitious firms looking at sustainable long-term expansion may wish to consider ‘growth capital’ from private equity and venture capital funds.

Many of these funds were raised 2-3 years ago and currently have an active need to deploy capital. Because of the challenges of recent months this has been difficult so there is currently a lot of cash out there that cannot find a suitable home.

This means there are great opportunities for companies to take advantage of this funding not only to support them during the next few months but to improve their business long-term through investment in automation and digitisation with the aim of improving  productivity, helping increase profits over the long term.

Companies considering equity funding should speak to their networks to understand what is available and how to access it.