- 29th June 2011
- Posted by: clivebarrett
- Category: The Leader Board
MANY of you will remember the Trustee Savings Bank and their slogan, ‘the bank that likes to say yes’. These days though, the banking institutions are being less forthcoming when it comes to parting with their cash as they rein in their finances – except when it comes to paying some of their staff handsome bonuses of course!
Research suggests that two thirds of businesses are being turned down for funding from high street banks. So if you are in that category, why not consider selling a stake of your business to private investors? In return, private equity houses make capital available, with one advantage being there is no need to put up assets as security. While it’s not necessarily the cheapest option, with investors looking for around 30 per cent as an annual return, there are advantages.
The main plus is that most private equity investors will be involved in taking the business to the next stage and their experience can prove invaluable.
Owners are warned to be realistic about what percentage of their firm they will be expected to give up. And it is considered worth it only if you are able to transform the business or if you are looking to sell in the near future.
However, changes such as expansion plans could well become more than a pipe-dream with the right backer together with a suitable level of funding to see those ideas through. This is because marrying up with an equity company that believes in your product and sees you as a vehicle for investment is not only a source of motivation for the business owner. It also drives the investment firm on in terms of their eagerness to lend support to your venture.
Gresham are a typical example, an organization that gets involved with companies worth anywhere between £5m and £100m. As well as capital, they will pour in expertise and a support network to help your business develop and move on.
Make sure you have a good personal relationship with the investor though. With a long-term partnership likely, you need to share the same goals and be dealing with people who possess the same appetite to get involved.
With so many banks preferring to say no, why not consider it? It could be the answer for you.