STOP PRESS - 24 Mar '10
Despite a UK national budget looming up, recent scare stories of an increase in capital gains tax and an election on the horizon, (with little hope of an enlightened tax regime coming into play whichever party wins the election) we have seen an increase in confidence levels since October 2009 by both entrepreneurs who judge the timing right to establish or expand their businesses and from investors backing them.
Following an era where it made sense to borrow if you could; now everything has changed. Companies usually go bust because they take on too much debt and are constantly micro-managing their cash flow to the detriment of running their business. Bank lending appears to be easing but the days of cheap debt are gone for the foreseeable future and many companies have learned that certain banks can exert a level of control that they had not imagined. Survival in hard times is much easier if you have no borrowings and own your assets rather than being stuck with long term leases for idle equipment and premises.
There is a strong appetite for equity investment by business angels at the present time but we are seeing an increase in companies wishing to raise debt finance at 10%-15% coupons rather than relinquish part of their equity. If the requirement is relatively short term this makes sense but many companies should consider replacing debt with equity to provide themselves with a long term working capital base from which they can take advantage of weak competition as we emerge from recession. We are surprised how many established companies jealously guard their equity whilst struggling to manage from day to day and only approach us when it’s too late.
Companies with no borrowings can survive a lot. Those with debt and problems looming need to move early to raise capital. Whilst we are maintaining our completion rate, timescales are extending and if companies leave it too late...there may be nothing left to save.
We do hope that you have already pencilled in the date of our next London Investment Fair on 18 May 2010. We hope it will be as successful as the last one in November when we had a record number of investors attending and have already delivered over £1.8m of funding to 8 of the companies who presented. If you are an investor and wish to find out more or register, please Click Here.
And don’t forget our Beer Investment Evening event in Central London on Thursday 25th March at 5pm. There are only a few places left if you haven’t already registered, but please remember this event is for investors only.
Mike Weaver, Beer & Partners Limited