Making a dream a reality

Jun 20 2007 by Bill Gleeson, Liverpool Daily Post

Cash is king and key to a firm’s prosperity. Bill Gleeson reports

YOU have a good idea for a business, but where do you turn for the finance to turn your dream into a reality?

The fact is there is a plethora of sources of investment out there, but this fact alone makes choosing the right one for your business all the more tricky.

Options range from finding a few hundred pounds to raising tens of millions from big invest-ment institutions to fund grand designs.

Start-up grants worth up to £500 for a simple business such as a window cleaning round can be applied for at Business-Liv- erpool, the local business support agency based in Old Hall Street. For larger sums, more elaborate procedures are involved.

Merseyside Special Investment Fund (MSIF) has funds totalling £107m. They provide a range of funding options for small and medium-sized businesses based in or relocating to Merseyside.

Mark Fuller is the managing director of Alliance Fund Manag-ers, the fund management com-pany that manages MSIF’s funds.

Mr Fuller said: “Cash is king – without it businesses go bust – so you need to address this right at the beginning. The minute you suspect there is a cash flow problem you need to take imme-diate action, if only to buy your-self the time to fully understand the problem. The key is to plan ahead. Many people when start-ing out under-estimate how much money they really need to start and sustain their business. It’s really important to take time to develop a proper business plan which addresses the costs involv-ed with start-up and expansion, and ensure there is enough headroom to accommodate any unforeseen expense. This will bring real focus to what you do and where you spend your cash.”

ANYONE investing in your business will need to be confident they can make a decent commercial return or, at the very least be repaid. You will need to convince investors that your proposition is viable, that you are capable of running the business, that you understand the risks involved and that there is a genuine market for your product or service. You must have an “elevator pitch”, ie, be able to articulate what your business does and why it stands out from the competition in two minutes verbally or in just one paragraph in writing. Mr Fuller added: “At the same time, you must be realistic. It’s a hard fact to face but there is always the chance the business will fail. You need to ask yourself the question what the consequences are of the businesses not surviving and how you and your family will deal with them on an emotional and practical level. Take advice and plan – it sounds daunting but it really isn’t.

“While investors need to see financial forecasts that demonstrate the potential of the business these figures need to be credible and realistic. So many people underestimate the time a product takes to get to market or are over optimistic about sales.”

It’s also important to ensure that you are using the appropriate finance tool for what you need – for example, don’t use an overdraft to purchase machines or factories.

Many people focusing solely on raising the cash for the business don’t consider the relationship they might have with the finance provider whether an individual, a bank or a venture capitalist. It’s vital that you think about this and address what interests they have and how they might be aligned to your business. Ask for and take references from others who have experience of any finance provider you are considering. You should also ask what additional benefits the finance provider might bring. This could mean contacts, advice, practical help, management support all of which could make a huge difference to the progress of your business. “

MSIF provides loans and equity packages from £3,000-£3m to small and medium sized businesses based in, or relocating to Merseyside. MSIF has four separate funds.

The MSIF Small Firms Fund totals £20m and provides loans from £3,000-£150,000.

The Mezzanine Fund totals £20m and provides loans with a premium or equity option from £150,000-£1m.

The Venture Fund totals £40m and provides equity investments of up to £2m, although it can take part in larger transactions alongside other finance providers.

The £27m Liverpool Seed Fund is the newest MSIF Fund. It invests in early stage, knowledge-based businesses and provides Proof of Concept funding from £50k to £100k, Commercialisation funding of up to £350,000, and first round venture capital funding of up to £750,000.

billgleeson