New funding opens for growing businesses

The British Business Bank has launched a £210 million investment fund to help smaller businesses in the South East of England start, develop and grow.

The South East Investment Fund will offer loans ranging from £25,000 to £2 million, together with equity investments of up to £5 million. The area covered includes Buckinghamshire, Oxfordshire, Berkshire, Hampshire, the Isle of Wight, Sussex, Surrey and Kent.

Although this particular fund is restricted to the South East, British Business Bank-backed investment funds are now operating across every UK nation and region outside London. Businesses elsewhere may therefore find that comparable sources of finance are available in their area.

The announcement provides a useful reminder that funding should form part of a business’s wider growth strategy. External finance might be used to purchase equipment, recruit employees, develop a new product, enter another market or provide additional working capital.

Before applying, the owners should be clear about how much money the business needs, what it will be used for and how the investment will improve its performance. Borrowing more than necessary increases costs, while borrowing too little may leave a project unfinished.

The choice between a loan and equity investment also requires careful consideration. A loan will normally need to be repaid with interest, but the owners retain control of the business. Equity investment does not usually require regular repayments, although the investor receives a share of the business and may have a say in important decisions.

Prospective funders are likely to expect current management accounts, financial forecasts, a business plan and evidence that the owners understand the risks involved. Preparing this information can also help management decide whether the proposed investment is commercially sensible.

If you are considering raising finance, early planning is important. We can help you assess the funding requirement, prepare forecasts and present the financial case clearly to prospective lenders or investors.