10th March, 2016
THERE is no doubt that the funding landscape has changed dramatically over the last few years.
As the traditional routes to finance required for growth and expansion were reduced, and in many cases, completely blocked, we witnessed the likes of private equity and venture capital taking on a much more prominent role in helping businesses and entrepreneurs achieve their plans.
And numerous alternative products and concepts came to market to fill crucial gaps, whether for start-ups, general working capital needs or acquisition and growth opportunities.
There is a lot to be said for the widening variety of lending types. Whilst generally all lenders did, and continue to, look for certain criteria to be met (and ultimately a strong management team with a sound grasp of the financials and business plan remains key for most), the “non-traditional” routes can bring much more to a business than just cash.
For instance, private equity and venture capital funding can bring an independent and fresh direction to the board, offering support and commercially valuable introductions to business opportunities which might otherwise be out of reach.
We have witnessed an upturn in activity from “angels” seeking to invest generally or in specific targeted sectors, encouraged by favourable tax treatment such as EISS.
Crowdfunding in the form of pools of private investors and companies looking for finance brought together via an internet platform has also been accessed by a number of our clients, particularly in the tech sector.
Acquisitions have seen funding from invoice discounting facility, asset-based or mezzanine financing rather than the traditional term loan financing of the past.
We are, however, beginning to see the traditional routes re-emerge with some of the mainstream banks becoming more active again in acquisition deals.
So it will be very interesting to see how the funding landscape develops in 2016 and whether this will have any significant impact on the streams of funding that we saw emerge in the downturn.
We may see a more “mix and match” approach to funding growth and acquisitions rather than using one lender as a “one stop shop”.
It is certainly going to be interesting to see how things pan out during the rest of the year and should make for some much welcome and healthy competition in the funding sector.
* This article first appeared in the Ward Hadaway Greater Manchester Fastest 50 2016 supplement. To read the supplement in full, please click here.
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