Industry experts offer top tips for employee-owned businesses accessing finance for the first time

Employee-owned businesses thinking about funding for the first time have been offered top tips for what they should and shouldn’t do when accessing finance.

Speaking at the EOA Annual Conference 2021, three industry experts provided their insights into the role banks and investors can play in unlocking the potential that employee ownership can bring in terms of benefits to businesses, employees and customers, both in financing the transition and investing in future growth.

The trio showcased the “many different options available for accessing finance – all with their own advantages and disadvantages”, and spoke about what lenders and investors want to know at the outset to understand not just where a business is at that moment, but what plans exist going forward.

They highlighted that “no one size fits all” and that the funding structure “needs to be bespoke to that particular company” – stressing the importance of “finding the right funding partner” that works best for your business.

The session also touched on how lenders like to build a relationship with a business to “really get a feel for what they are about and the culture”.

It ended by asking the three experts for their top do’s and don’ts for any business considering accessing finance for the first time and here is what each said:

Know where the value is in your company… and don’t be shy

With a career that has spanned over three decades in the financial services industry, Julia Godino is Head of Credit Underwriting at Unity Trust Bank plc, which wants to be the bank of choice for socially minded businesses. She advised EO businesses looking for finance:

Do “look at how their business adds value, that’s the basis for what’s their unique opportunity for their business within the market place they sit.”

Don’t “be hesitant about sharing information, share as much information as you can with your funders and show that passion shining through. Don’t be fearful about sharing that information, your aspirations, your hopes that you’re driving for, I think that’s a hugely positive story.”

Be prepared… and make sure there are no surprises

Head of Credit Greg Beamish leads the underwriting team that assesses funding proposals at ThinCats – which focuses on serving mid-sized businesses that often struggle to access the finance they need. He said:

Do “come prepared. A well-advised business is just presented and packaged very well and unfortunately, rightly or wrongly, investors of any kind don’t always have all the time in the world to spend time with a business, so coming prepared will really give you the best chance of success.”

Don’t “offer any surprises. If there is something bad or something different, just tell us up front and we’ll try and work with it. Definitely don’t do an 11th-hour change of something material because no funder likes being backed into a corner – unfortunately it’s easy to say no when it’s the 11th hour and you are about to put money out of the door and something comes left field. Keep the dialogue open, we are ultimately partners, that’s the way to look at it.”

Get advice on funding model… and be careful how you portray your numbers

Peter Matthews, who has worked with employee-owned businesses for over 20 years, is Partner, in Advisory, at Capital for Colleagues, which advises and invests in companies. He said:

Do “get advice, in terms of the funding you are looking for. There are lots of options out there for your business, so it’s not just about vendor finance, there are plenty of other options around debt and around equity.”

Don’t “be unrealistic with the numbers you are presenting. Normally when we get to see numbers from a company, they are always beautifully optimistic and wonderful in terms of how the future is going to turn out, but they rarely turn out as they have been portrayed. I will often ask them to go back and recut them and give me another set of numbers that are going to show x, y and z. People obviously want to portray a really rosy picture, but the reality isn’t often quite as portrayed.”

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