Region’s firms ‘face shifting funding landscape’

THE growth of peer-to-peer lending and the re-emergence of Government-backed funds could provide a shot in the arm for the region’s fastest growing firms, according to Yorkshire-based lawyers.
Ward Hadaway's Gavin MaddisonWard Hadaway's Gavin Maddison
Ward Hadaway's Gavin Maddison

Corporate and banking lawyers at Ward Hadaway in Leeds believe that the options available to companies, particularly fast-growing businesses with strong management teams, are changing as new products make their presence felt. The comments were made as the build-up continues to the Yorkshire Fastest 50, the annual run-down of the fastest growing privately owned companies in Yorkshire which Ward Hadaway sponsors and organises with The Yorkshire Post.

Gavin Maddison, corporate partner at Ward Hadaway in Leeds, said that accessing finance remained a vital ingredient to the success of any growing business.

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He said: “Companies looking to expand, whether that is by acquiring rivals, increasing their production capacity or accessing new markets, invariably need to look for finance to help realise their ambitions. There are a range of different routes to secure additional capital and it is noticeable that the funding landscape is changing. Various Government-backed and other funding schemes are now in the marketplace with remits to actively invest in businesses via grants and loans and the businesses which fit the criteria of such schemes are often those with high growth potential.

“For example, at Ward Hadaway, we have been involved in advising on investments involving the Business Growth Fund, which makes long-term equity investments in growing companies in the SME sector. Private equity is also re-establishing itself as a more mainstream source of funding and becoming more of an option for companies such as those found in the Yorkshire Fastest 50.

“In a similar vein, business angels and private investors are becoming more prominent in the market as they have taken advantage of what has been a fairly limited funding environment over the last few years although, like private equity companies and indeed any funder, they need to see certain criteria met before they will lend.

“In addition, stock market floats are becoming more common once again. We have certainly seen more across the North over the past year or so than there has been for some time.

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So what about traditional bank lending? Mark Smith, banking and finance partner at Ward Hadaway in Leeds, said that

after a difficult few years, the climate for bank lending appears to be improving.

He added: “Certainly the major high street banks seem to be quite active in the marketplace again. There is some more money available and conditions in general have eased over recent months. Asset-backed finance providers are also active in the market for particular types of businesses where there are assets such as stock or debtors which they can lend against.

“There has been a big increase in the peer-to-peer lending sector over recent years with most of the expansion in this

sector coming from the SME market.”

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Peer-to-peer lending has been promoted by the Government as a source of funding for SME businesses during a period

when traditional banks have been less active. To raise funds this way, a borrower will register with a website platform and upload information about its business and its funding requirement. Investors registered with the platform can then bid to take part in the funding the minimum amount they can invest is usually fairly small. An investor can spread its risk by potentially investing in a number of separate loans.

However, despite these relatively new sources of finance, companies still need to abide by tried and tested guidelines

when it comes to securing funding.

Mr Smith said: “If you have got a good business, a growing business with sound management then it makes you more

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attractive to funders of all kinds, from banks to peer-to-peer lenders.”

Mr Maddison agrees. He said: “First of all you have to have an opportunity which will attract a potential funder.Then the main thing is for the management team of a company to have a really sound grasp on the current finances of the business and the financial future of the business.

“If you can demonstrate both of these then you will be a good way along the road of securing finance for your business.” The Yorkshire Fastest 50 2015 takes place at Aspire Leeds on Friday March 20 with guest speaker StephMcGovern,business reporter for BBC Breakfast.

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