The Changing Face of Funding

11 August 2020 |
by Rachel Gill

“It’s a new dawn, it’s a new day, it’s a new life for me and I’m feeling good.” - Nina Simone

Yes, I am feeling good because the Covid-19 crisis has caused me and others to change our ways of thinking. As one of my wonderful daughters said to me - “You’re adapting”, I also think am evolving, as indeed we must all do now more than ever to survive.

We have all seen some unprecedented changes in our way of life and I predict there will be many more to come, but one thing is certain (a bit like death and taxes!) and that’s that the money flowing out of the government into business at an unheard of rate cannot continue or UK plc will simply go bust.

On the other hand, the need to revitalise our economy is a key priority and, in my view, it will need all the spirit and determination of our SME entrepreneurs to play a critical role in this essential bounce back.

Traditional routes to funding will be there, the government won’t let retail banks fail again.

Private equity and venture capital funders must invest to grow as that’s their business model.

Bank loans

My prediction is that the banking sector will be super cautious wanting extensive personal guarantees and very strict covenants before agreeing to lend. Private equity and the like will be able to be choosier than ever and will be looking for bargains, which means you may have to give away more than you want to.

Asset Finance

Assest Finance will grow I predict, as the security for the lender is better secured than say an overdraft as they have first charge on the assets. But of course, you have to have the assets to gear up on.

And for many businesses all they will have, will be their debtor book which means an invoice discounting facility or a factoring agreement. Unfortunately, not only can this be expensive, but it is not suitable for some companies.

I predict Hire Purchase and lease options will become much more the norm though this is not necessarily going to help fund working capital.

As such now is the time to take a creative approach to your financing needs.


Whilst it is almost certain we will Brexit and as such most European grant funding will disappear, there are other opportunities. The government has laid out four clear ‘Grand Challenges’. So far, these appear to be forming the basis for all of their funding through the Innovate UK smart grant. These grants allow you to access cash to help develop ideas, projects or businesses which support their overall aims as an administration. They are:

  1. AI and Data
  2. An ageing society
  3. Clean Growth
  4. Future of Mobility.

So, if you have a business idea that operates in these areas, you could be in luck. But some warnings, grant structures are extremely specific, for example they often dictate the specific geography for the innovation. Raising money through government grants may also not be right for you if you need the money quickly. Often the application process alone can be over 6 months.

There are grants available which are for less specific development areas; these are known as Smart Innovation Funding. Again, however, these grants only come up from time to time and the application process can be rather complex.

A word of warning no grant application is simple. Many have caveats that will prevent execution even if you quality. The approval process can be long and arduous and there is never an unlimited pot so you may miss out simply because the fund has dried up.


This has clearly been available as a method of creating deal opportunities since 6000BC. There are some bartering sites though most seem to be state side and more linked to consumer to consumer than business to business. However, that should not stop you suggesting.

I recall when I first started my company and had no disposal cash and I desperately needed some brochures and business cards. I approached an early stage design and print company and although the price was a good one it was beyond what I could afford. I suggested I help with their accounts production for a few months and happily they jumped at it - Job done! That relationship lasted many years. Sometimes cash was exchanged, but often it was a service swap.

My first Non-Executive and I basically traded time in each other’s companies i.e. I sat as his NED on his board he sat on mine – perfect.

It is always worth suggesting I would say, what have you to lose?

Equity swaps

This is a little more complex, but we are being creative so if you have no money and nothing that’s tradable, why not consider swapping some shares in your business for some shares in the business you wish to trade with.

That way some sort of transfer pricing can be agreed and both parties benefit from business growth. Of course, it needs some work to make this effective and you will need a transparent share valuation and a robust shareholders agreement.

Convertible loan notes

This is essentially where a lender and it could be a high net worth for instance will lend money (unsecured) on the basis that if something happens, and this can be a positive or a negative, that they can convert what is essentially debt into equity. Again, the devil is in the detail of the agreement.

Put and Call options

This is useful in a business sale transaction. It’s not the same as an earn out where essentially the vendor has to deliver certain objectives to receive a payment, or a vendor loan note where the vendor essentially waits for their money on a transaction and as such is usually an unsecured or at best a subordinated creditor.

A Put and Call means the vendor sells a proportion of their shares but has a guaranteed trigger (date or expression of value for instance) when they must place their shares on the table and the buyer must purchase them, and all this is in an agreed valuation manner.


Crowdfunding is the fastest growing and most vibrant lending community there is in the world. With over 600 sites worldwide and growing exponentially each year.

In the midst of Covid-19 £6b has been invested in these sites, offering everything from gifting to reward, to debt and equity - there is a site to suit most needs.

Historically raises were in the tens then the hundreds of thousands, now many platforms are raising millions of pounds per deal. The beauty of this form of funding is not only do you hopefully raise the funds, but you create a wonderful crowd of loyal customers.

Choosing the right site, creating the perfect pitch, getting traffic to the opportunity, and securing a corner stone investment (for equity raises) takes skill and time. Generally, you have one chance as with most sites it is ‘winner takes all’ – i.e. if you do not raise the target figure you do not get anything.

At fds we can help you with all these options and indeed more traditional raises, with 400 plus transactions behind us we are well connected, and we know exactly what we are doing. For more information on our services please click here or get in touch to discuss your business requirements with a senior member of the team.

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