|Requirement:||£50,000 working capital as a bridge to venture capital|
|Sector:||Technology, Employee benefits|
This is a business that is growing fast. Their clients are multinational super brands who they lock into three or more year contracts without break clauses. Whilst growing explosively is appealing to venture capital and private equity, the business felt the pressure on their cash flow as they aimed to deliver their growth. Not wanting to give value away to future equity investors they sought to bridge the cash flow gap with working capital in order to land a few more contracts prior to the equity fund raise.
What was the challenge?
Given the credit quality of their SuperBrand clients, the growing contract book and each contract being safe for a minimum of three years, achieving contract finance would have been easy and scalable. However, the directors were extremely price sensitive and didn’t want to borrow more than was absolutely necessary. They were looking to bridge only until they achieved their equity raise.
Whilst most business and their advisors know about startup loans, few really use it to their advantage. Contrary to what most use this product for, this was an established business and it had been around for more than two years (maximum criteria for a startup loan at the time).
The reality is that startup loans have great flexibility and is some of the cheapest funding in town. Whilst the business was incorporated longer than two years ago, the 1yr R&D can be excluded, enabling only the two years of revenue to be considered against criteria. We were able to achieve £25,000 per director, and a 3yr interest only loan, providing a very low monthly repayment rate. Best of all there are no entry or exit fees, so if they decide to pay it back following raising funds through an equity raise they are free to do so.
Startup funding is an extremely flexible way to fund a business and can sit with many other products, giving a diversification of funding lines as well as a great price point.