Funding and investment are words I hear daily as many of my clients start their enterprising journey. These words are used interchangeably, but I actually define these as very distinct opportunities. I fear many do not honestly understand the array of options available to them, the risks and benefits of each, but often dive right in unaware through desperation, excitement, naivety or just simply unaware there are other options available to them.
As such my legal practice seeks to fill a space that we believe the finance sector has created. We can discuss the many options available in the market without conflict or personal gain; explain the differences; highlight the legal pros and cons and start them on to the right path for them and their business. We say we “without conflict” as we do not profit from whichever route they take, but if they succeed we have a long term client so our aim is always in synergy with theirs.
For example debt financing, bank loans, bank growth enablers and corporate bonds are very much “funding” for your business as no equity is passed over, but they want to see a payment vehicle and a detailed plan. Whereas crowdfunding, EIS, Angel investment, equity investment might mean that you are not ‘on the hook’ for a loan or to pay back, but you have released a share of your empire and you may have to accommodate investors requirements.
I know from experience that there are many opportunities, rates and structures, brokers and platforms but how do you know where to start?
I set up in 2009 with £5000 and a case of files. I simply became so disillusioned by the profession that I had no alternative route to go down. I made the common mistake that many do – extending too much credit to clients, not getting the right accountants at the start and not fully understanding my cashflow. However, just over 7 years later I am a far better solicitor as I can understand and offer practical advice and legal advice in relation to starting up, surviving and developing a business. I can use my mistakes and the strengths I discovered to help my clients avoid their own bumps in the road.
As a result of my new found entrepreneurial routes and innovation I have seen gaps in the legal sector and financial sector that we have been able to develop into a unique selling feature of this firm. We have for example:
1. created corporate bonds from £5-20 million which permit companies to raise funding from retail, overseas & sophisticated investors paying an agreed market rate interest set by the company. There are no personal guarantees or investor requirements to meet, no equity given away and they remain in complete control of their business. However, they must have collateral and structures in place;
2. We have assisted many companies with their SEIS/EIS structures so that we can help, with a team of expert advisors, incentivise equity investors due to the tax benefits afforded to the incoming investor;
3. We have spent a lot of time with the banks working on their growth enabler programmes, ability to borrow on intangible assets, attaching clients to mentoring programmes and of course straight forward market rates loans. Our understanding and knowledge of their criteria and outlook is invaluable guidance for clients who want to go down the route of debt funding.
4. Crowdfunding and angel investment is often at the forefront of most client’s ambitions and ‘Dragon’s Den’ often sends people on a pitching frenzy. For many this is a perfect route, but for some the terms are just too prohibitive for their business to truly grow.
For many it is a true minefield when they are looking at the vast array of options available to them and trying to understand each one. We find sadly those that take the wrong path can very rarely get off it.
I studied part time whilst working a full time job, then gave up a successful management role to start again as a trainee solicitor, simply as I had no financial choice.
This was both good and bad – good as I saw a different working world than just the legal sector and it made me the multi-tasker and rounded person I am today, but it delayed my legal career and it was of course difficult becoming a trainee after running my own team, but needs must! As a result of working I paid off my student loans and credit cards and refused to put myself in debt ever again. As such when I set up my business I refused to secure investment, merge with other people or take on large debts. This meant that I could only slowly and organically grow the business, but after 7 years we are now in our own building, I have many lawyers working for me and there is real direction and growth. I am proud in what I have achieved and where I am going, however, I now have to accept that to scale-up or reach above a ceiling then funding or investment is unavoidable; I am less scared of this idea as I am now very well informed of the options, the risks, the structures and can make an informed business decision based on my needs and that of the company and will not be influenced by who I meet and the enticing offers you hear about.
My advice to any start-up or expanding, growing business is do not be scared to take the next leap, but to go in fully armed with all the information and options available to you. Find someone independent and free from conflict to offer this advice because you may end up on a path which is not suitable for you. As lawyers we help our clients understand the different options out there, let them make an informed choice then present them the people in the market that can move that forward, but we are always there to protect and support them. We advise on the initial terms, the paperwork, the risks, the options and structures. Their success is our success!