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Looking to raise finance? Banks are not your only option …

4th January, 2017 No Comments

Various coins presented close up on banknote background shown in the distance

Raising finance can be a difficult task. Entrepreneurs and experienced businessmen alike are talking about ‘the banks not lending’. This is also a common headline used in the press when writing about the economy and recession. When faced with such a statement, you often have to ask “So where have you looked? What lenders have you approached? Who else?”

Access to credit is vital for businesses to expand, develop new products and, ultimately, contribute to economic growth. Business West’s Quarterly Economic Survey – part of the British Chambers of Commerce national survey, which is a highly respected snapshot of economic conditions for business – asks ‘What barriers to growth have you experienced?’ and, consistently, one of the top answers is always access to finance.

Yes, lending has reduced since before the recession, but could this statistic potentially be somewhat due to a lack of knowledge of the different sources available? 71% of small business owners, in an AXA survey, said they had not heard of crowd funding and 54% were unaware of the existence of peer-to-peer lending.

In these uncertain political times, alternative sources of funding can offer a huge boost to small businesses and are an increasingly viable option for growth. Some people may say traditional methods of raising finance, such as banks, aren’t what they used to be, even though banks were never meant to be the ‘be all and end all’ when it comes to investment. It is important for business owners to understand the wealth of other opportunities out there, some which come with greater control. For example, Self Directed Pension Schemes are under used and arguably under rated for the purposes of assisting business growth. Pension-led funding is a type of commercial finance which offers an alternative to traditional business funding, such as bank loans or overdrafts, and involves using business owners’ accrued pension funds to invest in their own companies. Pension-led funding doesn’t require personal guarantees and enables you to use Intellectual Property (IP) as a legitimate asset class, which broadens the opportunity further. More than 1,300 businesses in the UK have successfully used this type of funding.

Other options including equity crowdfunding have become much more popular in the last few years, but it can be much tougher to pitch successfully online than clients anticipate – seeking advice beforehand is highly recommended. Angel investor funding can also offer mentoring support alongside investment, but valuations can be tight in some sectors and the process can be time consuming, so it’s definitely worth speaking to an expert to look at all the options available, then weighing up the pros and cons.

There are also other forms of finance such as grants. Grants are pots of funding for a specific purpose and are usually match funded. To find out if there are any grants to suit your purpose and to check eligibility criteria, visit the Gov Support Finder.

What businesses need to understand is that there are other ways to access funding and different solutions can be found. But, it’s important to ask, why should someone lend to you or your business? The answer is they shouldn’t, unless you can prove to them that you are worth investing in.

Written by Tara Gillam, Head of Enterprise at Business West delivering business support in the South West.


Pitching your business idea is easy.  Or is it?

9th August, 2016 1 Comment

Multi ethnic business group greets somebody with clapping and smiling

You’ve come up with a great idea for a new product or service and you need support, whether it be financial, technical, or professional partnership.  The next step is convincing the right person to give you that support.

So what do you have to do?

Finding the right audience to pitch to is the obvious first step (and there’s a few links below to help with the search), and then you have to prepare your pitch.  And prepare you must!  Your idea will be as clear as crystal in your own mind but you have to portray that idea to others with the same clarity.

Whether pitching to a friend or associate, a group of business angels, or a bank manager, and whether it be face-to-face, using a business plan, or online, there are some fundamental rules to ensure you make your pitch the best it can possibly be.

Be prepared

Make sure you have all the relevant facts and figures at your fingertips – have a print-out with you that you can refer to both at face-to-face pitches and when preparing a written or online pitch.  You should also consider producing a one or two page brief summary; use your business plan as a back up to your pitch (in some cases your business plan will form the major part of your pitch – particularly if you’re talking to a bank about finance); consider producing a PowerPoint presentation; and develop a 5-minute elevator pitch.

Investors are as interested in the entrepreneur as they are in the business idea (maybe even more so) so prepare yourself too!  Be confident in your idea and show a passion for the business.  Investors need to know that you are logical, efficient, quick-thinking, and able to see your idea through.  They also need to know who you are, so be yourself!

Practicing your elevator pitch for face-to-face meetings will bring confidence but you also need to have answers to all the potential questions that might be asked of you.  Know your product, costs, market, and processes inside out and you will not be caught out by questions you cannot answer.

‘Knowing the enemy’ will give you an advantage too.  Research the investors wherever possible and use the information to your advantage to benefit your business – do they have experience in your industry? ; have they invested in a similar business before and how successful was this? ; how much time do they have to support you and your business?  Pitching to the wrong people is both a waste of their time and yours!

Pitching your idea

Spencer Waldron, presentation expert at Prezi, suggests that the best pitches tell a story.  Consider formatting your pitch with an introduction, a middle section of ‘chapters’, and an end where the main character in the story is your proposed market / customer.

The introduction could cover what is available now and the gap in the marketplace that your product or service will fill.  The middle chapters will cover your target audience and their needs; why your product will benefit them; why they will buy from you; who might stop your business being successful and how you will counteract this.  And the end would be the growth plan for your business and your exit strategy.  It would be worthwhile adding a brief summary which highlights the 3 things you want people to remember from your pitch – choose the 3 wisely!

Ensure your content covers all the issues that your potential investors will want to know about:  customer base; your team; costs and financial forecasts; competitors; and, of course, what exactly is it you want from the investor (and, where applicable, what do they get in return).

And finally your presentation should be well designed – smart, crisp, and to the point.  And make sure your personal appearance is as polished as your presentation.  In any printed or digital material keep text to a minimum; highlight important parts with ‘bold’ / text size / text colour; discuss one point at a time (in a PowerPoint that’s one point per screen); and use photos and images wherever you can.  Finally, maintain your branding throughout your presented materials.

So, there you have it – pitching your business idea is easy, isn’t it?

Written by Davina Young, Marketing Manager at Cavendish Enterprise


Cavendish Enterprise partners are able to advise and support you in writing your business plan.  Our business advisors can also assist with other skills and knowledge you may need to develop your business idea.

Some useful links:

Additional tips and thoughts on ‘how to pitch your idea’ from the British Library and from James Caan of Dragon’s Den.

Once you’ve got your pitch ready, the following links may be useful:

Pitch to Peter Jones

Pitch to Angels’ Den

Pitch on BBC’s Dragon’s Den

Launch your project on a crowdfunding platform

Looking to start a food and drink business?  Pitch on 16th Sept 2016

Pitch your business in Dundee, Scotland


The Crowd is getting bigger with £2.4m of extra funding

25th July, 2016 No Comments

Crowdfunder Plus-full-funding map

As Cavendish Enterprise begins its partnership with Crowdfunder having recently launched Cavendish Crowd (the crowdfunding resource for alternative funding for business starts and growth), it’s great to hear about the additional funding that is also in place and open to applications from eligible Cavendish Crowd clients.

Crowdfunder announced last week a deal which brings extra funding for UK crowdfunders as councils, brands and grant makers to pledge over £2.4 million on local and national crowdfunding projects.  The UK’s leading crowdfunding platform is to distribute this money, traditionally given out by councils, brands and community funds via grants or sponsorship, to crowdfunding projects that meet the partner’s funding criteria.  A further £1.3m is scheduled to be added to the funding offer over the next 3 months.

Projects, such as those posted on the Cavendish Crowd page, can apply for funding through these schemes, subject to eligibility, using the crowd to validate their ideas with this new route to secure additional funding and support to turn their ideas into reality.

Jason Nuttall, Head of Funding at Crowdfunder Ltd said “At Crowdfunder we believe in not only enabling people to make their great ideas a reality – but ensuring that they have access to as much support as possible along their journey. By distributing funding from partners into crowdfunding projects that have the support of the crowd, partners are not only supporting great ideas, but putting funding into projects that have also been validated by the crowd. The benefits to all are enormous, bringing fund distribution to a new level.

“National and regional partners distributing funds through Crowdfunder include Virgin Media Business, who pledged £50,000 to support start up businesses as part of the VOOM 2016 competition Crowdfunder Award, Dorset County Council who have £200,000 to support innovative youth projects in the county, Plymouth City Council, who have already turned £60,000 of council funding into over £430,000 of funds raised for their community and Creative England, who have invested £80,000 into crowdfunding film projects and £40,000 to discover and support female game developers.”

Phil Geraghty, MD of Crowdfunder added: “Council’s, brands and grant makers are enjoying some valuable benefits. They are able to easily identify projects they want to support with pledges. Partners such as Plymouth City Council have been able to amplify the money they distributed, with money raised for projects from the crowd, and also reduce administrative costs.

“Brands are also able to connect with consumers individually, and create great stories, as they help turn ideas into reality. All partners benefit from greater exposure to large-scale audiences and public engagement alongside positive success stories.”

Recently, Crowdfunder partnered with Virgin Media Business to offer crowdfunding to businesses taking part in VOOM 2016, the UK and Ireland’s biggest business competition.

Scott Wilkinson, Head of VOOM, added, “’Crowdfunder and Virgin Media Business partnered to help businesses and together we’ve turned a £50k match fund into over £700k  – and it’s still growing fast.

“Crowdfunding offers a pretty spectacular option for many businesses to reach out and secure their next objective, and our ongoing partnership is helping unleash future economic successes.”

Launch your project with Cavendish Crowd and find information on additional funding with Crowdfunder Plus.  Help and support with launching your project and growing your business is available to Cavendish Crowd clients through the Start & Grow programme, a government initiative for start up and growing businesses funded by the Regional Growth Fund.

So, you’re considering crowdfunding?

7th July, 2016 No Comments

CavCrowd header

Congratulations!  …… but as either an investor or a fund raiser you need to do your research to understand the different types of crowdfunding and the legal issues surrounding each of them.  Crowdfunding is such a new and, thus far, little understood arena, that it is impossible to give full legal advice in one blog.

However, what I can do for you is very briefly raise some of the issues that arise to give you a starting point upon which to begin your own research, or to contact a legal professional for further advice.  I’ll try not to put too much emphasis on the usual caveats but that doesn’t mean they don’t hold true.

There are a huge number of articles already on the web which outline specific legal regulations and so, with a tip of the cap to the real experts – you should really check out the FCA’s own guidance – I’m simply going to try and bring to your attention some of the ‘Oohs’ and the ‘Gotchas’ that you may not have considered.

Firstly, what IS Crowdfunding?
Well actually it isn’t just one thing, and many of the biggest name crowdfunding platforms that you might have heard of actually do very different things. It’s all too easy to categorise crowdfunding as debt v equity, when there are some quite distinct differences within these categories.

Let’s explore these and perhaps attach some labels to distinguish them, before looking at specific risks and benefits attached to each;
1. Donations-based crowdfunding (Crowd-donation):
2. Reward-based crowdfunding (Crowd-reward);
3. Loan-based crowdfunding (Crowdlending); and
4. Equity-based crowdfunding (Crowd-investment).

Usually unregulated, crowd-donation is just that; a platform for a project to seek donations to further its cause. Kickstarter is one of the best known platforms for this type of project; allowing artists, bands and other creative types to seek funding to achieve their goals. There is no specific return promised or offered to investors, other than, for example, the chance to have been a part of bringing their favourite band back to life after a 20-year hiatus.

One step along are the pre-payment or Crowd-reward scenarios. In this type of crowdfunding, the fundraiser offer the investor an opportunity to receive either a ‘gift’ or a version of the product they are funding. Again, not generally regulated because these platforms are more of a marketplace. Examples include film projects offering a signed still from the production process or dinner with the director or a promise to supply investors with the first production-ready prototypes of the particular product before the general market receive them (although often at a premium).

This is peer-to-peer (or P2P) lending and is almost always regulated, whether directly or indirectly. A debt-based model of crowdfunding, the fundraiser is asking the general public (or a sample thereof) to lend them some money, on agreed repayment terms. How that repayment is structured and described can cause its own problems (which we’ll dance around a bit later) but in essence it is that simple – the investor acts as a bank and expects to get their money back plus ‘interest’.

Finally, standing squarely in the middle of a regulatory-minefield, is what most people typically think of when the phrase crowdfunding is used. In 2014, according to Nesta and the University of Cambridge, the average amount raised through equity-based crowdfunding was £199,095. Fundraisers offer to give away an element of the equity in their company in return for a financial investment. Conceptually, you might think of each platform as a mini-stock exchange for private companies, start-ups and new ventures; some genuine, others more accurately described as, ahem, ‘ill-thought through’.

Much of the actual activity covered by crowdfunding is not new – after all businesses have been seeking investment, loans or other security from private investors for many years.

What is new is the power of technology, the internet and a more investment-ready culture to accelerate and amplify the scope of these investment-seeking activities.

In the past, only select high-net worth individuals would have been plugged into these investment-seeking circles. Now, literally anybody with a laptop or a mobile phone could in theory sink their life savings into a shaky venture over their morning coffee.

This has driven the UK’s regulatory powers (predominantly the FCA) to take an increasingly involved position in the debate, with new regulations in 2014 forcing almost all crowd-lending and crowd-investments platforms to be regulated.

What are the benefits and risks of crowdfunding?

Crowd-donation and crowd-reward are usually unregulated and offer little exposure to the individual investor. Short of a slight disappointment that the specific project you funded did not happen or the gadget you pre-ordered failed to arrive, the potential for loss is usually limited.

Be warned though, there can be tax-traps for the unwary, as donations may trigger an income or corporation tax charge. Sending a shiny reward back the other way, whether or not it was asked for or anticipated, will almost certainly be treated as a VATable supply, unless it isn’t – and it really will depend on the specific circumstances, so make sure you consider this in advance.

Crowd-lending (eg Funding Circle) is actually the fastest-growing form of crowdfunding, with some estimating that it might be a £12bn market by 2030 and £749m of business loans created in 2014 alone.

Now regulated by the FCA, platforms must;
(i) hold minimum capital reserves.
(ii) keep separate their own money from that of investors.
(iii) have contingency plans in place to maintain payments in the event that the platform goes bust.
(iv) be much more explicit about the risks involved with crowd-lending – a regulatory reaction to the earliest platform promises of these loans being equivalent to a bank account.

For the business seeking investment, the obvious benefit is quite simply the opening up of a seemingly untapped and unlimited market of funders who might be able to support their venture; where traditional bank loans may not be available.

Another opportunity is the emerging trend for revenue-sharing repayment, where the original loan is capitalised and repaid at the end of the loan period (or in some cases not repaid at all) in return for the investor receiving a share of revenue, rather than a fixed interest payment. This mitigates the cost of servicing the loan in instances where forecasted revenues are lumpy.

Drawbacks, outside of the usual ‘can the loan be serviced’ question, centre on the strength of the platform to actually achieve a successful loan placing and the cost of any fees payable to the platform itself, both on entry or exit of the loan.   From a tax perspective, the loans will be generally treated as any commercial loan, with the relevant corporation tax write-offs and balance sheet treatment as a bank loan.

For the investor (lender), crowd-lending tends to be slightly lower risk than crowd-investment and fewer regulatory hurdles apply. The risks mainly centre on the lack of sophistication that ‘crowds’ are likely to have compared to institutional lenders such as banks. The lender is therefore relying on the platform to consider things such as anti-money laundering, credit checks and scoring to verify the viability and provenance of the business seeking funding.

Even then, given that most businesses turning to crowdfunding are start-ups, these loans are inherently riskier than leaving your cash in the bank and recent FCA complaints have highlighted the lack of honesty in some marketing material provided by crowd-lending platforms. Admittedly this was part of their pre-regulatory research and it is possible that the ‘bad apples’ are being weeded out.

Nevertheless the lender must consider how plausible any claims of revenue forecasting or credit viability are, whether made by the platform or the business itself along with the availability of any assets or security that the lender could use if the business defaults.

Remember that platforms are inevitably in a slightly conflicted position, as they are usually generating their fees based on successful loans placed, which has in the past caused some of them to underplay the severity of the risk of these loans not being repaid.

New changes in 2016 which enabled investors to lend money through a tax-efficient ‘innovative ISA’ scheme have been fraught with delays but do represent attempts to recognise the new wave of lending. They are expected to provide a major boost to the Crowd-lending fraternity, however it is too early to evaluate their real impact .

Crowd-investment ….. and finally, the equity play. This is where things get really exciting, complicated, and impossible to neatly summarise. You have to consider both the regulatory impact of the FCA (the platform should be FCA regulated) and the impact of the Financial Services and Markets Act (FSMA) which regulates the type of shares that can be offered, and to whom.

For the business seeking investment, the advantages of crowdfunding include:

Access to a much wider pool of investors (although see below, be careful it is not too wide);
Generally involves giving away substantially less equity per £ invested than a traditional angel or private equity round, largely because no one investor is investing enough cash (or perhaps has the relative sophistication) to value the venture accurately;
Limits the control given away – for example where an institutional investor may require a larger slice of the equity and insist on a seat on the board; individual crowdfunders are unlikely to have the sophistication, or the inclination, to demand this;
The process itself may generate publicity/marketing for the new venture (which may also have drawbacks, see below);
Harnesses the ‘herd’ effect – if you can gain traction on a crowdfunding platform there is a real possibility of the ‘me-too’ mentality (technically known, I believe, as ‘FOMO’) that can generate larger-than-expected investment pledges

Downsides perhaps mirror those of any equity investment, however for the unsophisticated start-up, particularly one without a seasoned advisor, this may be a regulatory minefield – with potentially criminal sanctions for getting it wrong, even if much of the burden is passed to the platform.  In particular, businesses should consider the following:

Have you vetted your chosen platform to ensure it is FCA regulated?
Assuming yes (and if not, run), make sure you are not guilty of ‘financial promotion´ – a criminal offence which centres on attempts to offer shares in a private business to the general public? (platforms often get around this by inviting people to become ‘members’ of the platform, limiting the scope of who gets to see it).
Are you in a position to produce and provide clear information, prospectuses, forecasts and investor materials? These must adequately and accurately highlight the risks of investing in your business.
Are you going to give away valuable intellectual property by showing information on the platform/website? Unless you have protected your product (ie trade marks, patents, design rights etc) you run the risk of competitors stealing your ideas. Even if you have protected them, there is still a risk of copying taking place, so be prepared.

For the investor information asymmetry is the major flaw in the crowdfunding model, from an investor’s perspective.  While these platforms open up a world of investment opportunities to the general public, many of these potential investors will not have access to the kinds of tools, information and experience that an average institutional investor has to hand.

And so the potential benefits are huge – you could make a strategically tax-efficient investment in the next Trunki or Facebook.

Prior to regulation the FCA highlighted major risks with some platforms over-emphasising the benefits of crowd-investment while seemingly ignoring the risks, often by omitting or cherry-picking the information provided.

Regulations do exist to try and mitigate this by restricting the pool of people that investments can be offered to. This is where it gets really complicated and in truth, outside of the scope of this note and one for the platform to wrestle with, rather than the business itself. In brief they often involve the platform requiring investors to ‘self-certify’ themselves as either a high-net worth or ‘sophisticated’ investor (capable of spending their money as foolishly as they please) or a ‘restricted’ investor.

Investments to restricted investors (Joe and Joanne Public, essentially) often involve a cap on the amount raised or the individual amounts invested, either in real terms or as a % of the investor’s assets.

There are significant tax advantages to many of the investments available on crowdfunding platforms, being new startups. These include Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) reliefs. Investments attracting this relief benefit from an immediate income tax reduction between 30% – 50% and a reduced or zero obligation to pay capital gains tax when the shares are sold.

Although not directly benefiting the businesses looking for funding, these schemes are so attractive to investors that they can mitigate the riskiness of crowd-funding, leading to increased funding being achieved.

The tax treatment of investment will again be the same as any equity round, with corporation tax and implications dependent on the particular business, its profitability and success.

Conclusion and other thoughts

From a legal perspective, particularly for the business seeking funding, it is important to remember that there are likely to be two key relationships governed by terms and conditions that must be checked.

First is your relationship with the chosen platform. How does this govern fees, risk, obligations over regulatory requirements and enforcement of any failures on the part of the investor/lender.

Secondly is your relationship with the ultimate investor/lender. What credit or other checks have been carried out. What implications are there for future investment rounds or repayment obligations and are there any obvious tax implications that have been overlooked.

Overall, the great opportunities afforded by crowd-funding of all types are starting to become apparent.

However, it is impossible to conclude an article like this – however frustratingly – without liberal use of phrases like “it really depends on the circumstances”, “speak to a grown-up about tax” and “make absolutely sure that you don’t accidentally engage in financial promotion by offering your shares to a global audience and end up in a US jail”.

Written by Richard Turner of Alt Legal Ltd on behalf of LawyerFair

Launch your project to raise funds for your startup or growing small business with Cavendish Crowd – the crowdfunding platform specifically supporting small businesses across the country.


Click for downloadable document giving overview of the legal considerations to undertake when considering crowdfunding, either as an investor or a fundraiser.

Contact Richard if you have any legal questions about crowdfunding.

Cavendish Enterprise has teamed up with Crowdfunder Ltd to bring Cavendish Crowd to startup and growing small businesses across England.  Crowdfunder Ltd carries out equity crowdfunding activities through its associate partner Crowdcube Capital Ltd, which is authorised and regulated by the Financial Conduct Authority (No. 650205).

Alt Legal Limited is part of Alt Professionals – providing joined-up professional support for SMEs across legal, financial, HR and advisory services, under one roof.

Join the Cavendish Crowd – five top tips

20th June, 2016 No Comments

CavCrowd webpage header

We are passionate about supporting new businesses and we’ve helped thousands of small businesses flourish across England.

Cavendish Enterprise has teamed up with Crowdfunder to create Cavendish Crowd – a partnership aimed at supporting and inspiring businesses across the country through its newly launched crowdfunding platform.

In our quest to support some of the brightest and most exciting start-ups, by offering an alternative form of finance to the usual arrangements offered through banks, etc, Cavendish Enterprise partners are now able to advise and support startup and growing businesses through the crowdfunding process.

Visit the Cavendish Crowd site to launch your crowdfunding project, and find crowdfunding advice and support.  Here are five top tips to start you off:

1 Identify and engage with your network

Crowdfunding is about reaching out to the community around you, in business this could be your current customers – or your future customers if you are launching a new product or brand.

Start close to home with your friends and family, talk to your loyal supporters and identify your wider network. You’ll need their support – so make sure to ask them to share your campaign when it’s up and running.

2 Warm up your crowd

It’s time to get everyone excited. Let your crowd know you’ve got a great project in the pipeline. Share a few details; get your supporters ready to pledge. 90% of the work on your campaign should happen before you go live and start funding. That includes getting your biggest fans ready to pledge on the day you launch.

3 Great rewards

Make people want to pledge to your project not just to help you out but because they get something amazing in return: Rewards should be unique, great value, and non-geographical – appealing to everyone who is interested in your idea – making your project an exciting one to be a part of.

4 Plan – fail to prepare, prepare to fail

You need a plan, you need a team and you need to know who is doing what and when. Many of the most successful business crowdfunder campaigns have pledgers lined up before the launch date in order to drive momentum once the campaign is live.

It’s also a great idea to plan your social media, PR and marketing approach before you start so it’s plain sailing when your campaign launches.

5 Talk to your community

Communicate with your supporters, before, during and after your campaign. Say thank you for their pledges – keep them up to date with progress on your project, send out rewards quickly and keep talking to them – where is their money going, how is it helping your business? These supporters are your customers and you want them to come back again and again – maybe even supporting your next Crowdfunder campaign.

So, if you have a great idea and think crowdfunding may be the best solution to raising the finance you require contact the Cavendish Enterprise delivery partner in your region, for support and advice, or go straight to the Cavendish Crowd platform and launch your project today!


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