Client meeting at Lloyd’s of London yesterday, that remarkable ‘inside-out’ building designed by Richard Rogers.

It’s all very corporate now, lacking the intimacy of previous rooms, but visits always bring back memories of working as a broker in the then ‘new Lloyd’s building’ in Lime Street – although it was already well past new when I worked there.

It’s interesting that the current building encompasses the site of the very first Lloyd’s building built specifically for the members in 1928

and that the 2008 Willis Building is on the site of the original ‘new’ building erected in 1958. Lloyd’s, the Willis building and the adjacent Gherkin largely occupied by Swiss Re form the centrepiece to the current city landscape.

A lot of people seem to think that the Government’s Enterprise Finance Guarantee scheme is dead. It isn’t.

Working on an acquisition for a client we were looking for the best deal, as always.

Despite a lot of bad press about the banks we have been able to secure the support of a high street bank under the Government’s Enterprise Finance Guarantee scheme whereby the bank is only liable for 25% in the event of default.

It’s a relatively small transaction but still requires a comprehensive and extremely robust business plan, three years financial forecasts – cashflow, profit & loss and balance sheets – and a plethora of peripheral documents.

It’s a lot of work and the cost to the client is high in percentage terms compared to the loan, but sets the expanded business on the road to further growth and probably more acquisitions as the increased turnover and future profit far outweighing the initial cost.

It just shows, if you know where to look and how to put a good plan together, there is still money available from the traditional sources.

There is more than one way to structure the sale of business

Completed the initial stage of a company sale today, with 50% passing to the new owners immediately and the current shareholders becoming silent and seeing their equity reduce to 25% over the next four years. Paperwork should be finalised this week.

It’s a sweet deal because the new owners gain control – through the contract and new shareholder agreement – but only have to fund 50% of the value. Both parties see dividends in the ensuing years and both will benefit from an eventual exit in say five years time.

Our client is particularly pleased as in total they should see 150% of their original ‘target price’.

Cash by Adam Hawkins http://anodizeproductions.com

Articles about boosting cash flow are in every business magazine at the moment.

These articles by the great and the good – or more likely a magazine hack quoting a wide variety of semi-well known business owners – seem to be getting longer and longer. One I saw recently offered 27 ways to ease cashflow and all the suggestions were useful, BUT in essence you only need three rules:

The three basic rules for boosting cashflow:

1. Invoice as soon as possible

1. Have an effective system of credit control

1. Make cashflow management a priority

Within those rules are a multitude of issues that can be addressed to help ease cashflow and indeed actually increase the flow of cash within the business, but unless you are following the basic advice the chances are that all the rest will be wasted.

What’s your favourite cashflow tip?

Do Business Angels provide a genuine opportunity or are they the latest scam?

Small business owners seeking additional funding are having a very hard time in 2010 with the established VC firms only interested in £5m plus deals and most banks having effectively shut the doors on new lending.

Business angels can be a useful source of early stage funding or at a time of significant expansion and while individuals may only invest quite small amounts they will often group together in a syndicate to provide larger sums.

There are advantages to using business angels as they:

• expect to lose a proportion of their investments – indicating they are prepared to take risks

• often conduct only cursory research – preferring to rely on their well honed business instincts

• usually only require relatively few meetings – rather than the ten or more most VC firms seem to need so they are a useful resource well worth cultivating.

However, like all successful sectors the scammers are moving in and small business owners can be particularly vulnerable if they are having difficulties raising funds and like most scams success relies on getting a small sum from a large number of victims.

So if you have any doubts about offers of introductions to investors – especially online for a fee of, say, £99 – take care as it may not be all it appears.

Legitimate business angels and the organisations that represent them are best contacted via a reputable intermediary that will be able to guide you towards those most likely to be sympathetic to your aims.

Don’t get caught up in a scam – raising funds is difficult enough already!

If you’ve had a bad experience dealing with potential investors, let us know – we’d love to hear from you.

Business by Adam Hawkins http://anodizeproductions.com

£836m is to be cut from the Business budget as part of George Osborne’s £6bn attack on the deficit in the UK economy announced today. In practice a proportion will be re-invested but this still results in a net cut of £700m.

The good news is that the much maligned planned increase in NI will now be reversed, but it appears that the Regional Development Agencies will bear the brunt of the cuts and a significant proportion of Lord Mandelson’s last minute grant programme will also be reversed.

In practical terms this probably means the end of grant-aided research or ‘free’ Business Link consultancy in the short term leaving most SMEs to fend for themselves whether expanding or attempting to recover from the recession.

As many pundits predicted the effects of the recession on smaller businesses are only just beginning to become evident as the real effects of recession start to bite – low order books, cancelled contracts and the payment terms circle becoming tighter and tighter as firms of all sizes start to experience cashflow problems.

Well known Cambridge insolvency practitioner Mary Currie-Smith of Begbies Traynor has recently restated her view that far more businesses will go to the wall in 2010 than in 2009 and certainly so far the statistics prove her correct.

The key to avoiding the potentially dire consequences of falling sales and ever decreasing cashflow is to recognise the problem and act swiftly and effectively. Formal insolvency advice may not be required, but taking appropriate advice as early as possible can often save the day – see case study

If on the other hand your business is booming you may still be affected by cuts to grant-aided programmes which in the past have allowed important R&D projects to go ahead despite limited in-house resource. That sort of funding is likely to disappear.

So what can be done to keep your business prosperous – whether that means aggressive expansion or careful and considered survival?

In short the answer remains the same as ever – be sure of your objectives, be certain that in practical terms they are achievable and create a robust business plan to guide you to success. The banks may not be lending at present, but eventually they will have to loosen the purse strings to survive themselves – when they do, be sure your business is still around to benefit.

Do you have a question or a comment about the business budget cuts?

KPMG has warned that a fresh wave of company voluntary arrangements (CVAs) is expected in coming months as the full impact of the recession takes effect.

CVAs allow companies under threat of administration to renegotiate debts with unsecured creditors.

While the number of insolvencies has fallen in recent months, a full economic recovery is often preceded by many businesses struggling with cashflow as they find themselves under increased pressure to restock and repay debt.

Under a CVA business owners and directors reach a compromise arrangement with creditors in order to avoid going into liquidation.

They restructure the financial arrangements and propose a plan to pay off its debts.  This may involve a partial write-off of debt, rescheduling of payments or renegotiation of contracts.

The main difference between a company that negotiates a CVA and one that goes into administration is that the CVA gives stakeholders the opportunity to openly discuss the best compromise for everyone concerned.  Once a company goes into administration creditors have little say in the process and often end up with a lot less than they would from a company that continues to trade.

In the majority of cases these procedures are successful and allow a business to continue trading with minimum disruption, saving jobs and giving creditors the chance to recover debts, albeit over a longer period of time.

The key to success is often in the management of the process during the period immediately before appointing an Insolvency Practitioner, the choice of IP and making sure the business continues trading as near to normal as possible during a period of intense and sometimes stressful activity.

If you’d like to discuss how a CVA might help your company to re-organise while continuing to trade please give me a call.

Leave a comment below – we’d love to hear from you.

I’m a great fan of Seth Godin’s blog and he recently posted a comment about people being afraid of buying apples in case they made a mistake and wasted their time or their money.

I come across this all the time with business owners who are so innundated with offers from coaches and consultants with promises ranging from improbably increased profits to all their dreams coming true that they end up doing nothing.

Nothing is not quite the right term.

They end up worrying and working longer hours to try and turn around a business that they have invested in heavily, both emotionally and financially.

However, I know from years of working with business owners that having someone who can negotiate with banks and creditors and get them a better deal can often make all the difference. Most business owners can look at someone else’s business and spot what needs to be done to improve it but they’re often too close to their own trees to see the shape of the forest.

Most of us don’t really worry about buying the wrong sort of apple. If we don’t like one sort we chuck it out and try another variety but choosing someone to help you turn your business around requires a lot more investment in time and money. That’s why we’ve found a source of funding that may mean you don’t have to risk your own money on finding out if we’re any good or not.

If you’d like to try our type of apple give me a call on 01480 830282.

If things look too good to be true its often because they are and a swift reality check is needed.

If you are running a business and you get an apparently golden offer you should ask yourself some hard questions before accepting offers of help. This is especially true when considering possible inward investment in your business involving the release of equity.

This was the case for a home-counties logistics company, operating in a niche market. The business suffered from intermittent pressure on its overdraft and the directors were looking for £250K to alleviate the financial stress.

From a less-than-auspicious start the two directors (mother and son) had built the business over five years with the support of other family members. Periodic but regular pressure on the overdraft had led to the need for frequent financial juggling which in turn was resulting in lots of stress and leading to understandable conflict between operations and finance. The 50ish FD was keen to retire and step aside if the company’s future stability could be secured.

The chief solution being considered was an investment and/or a loan offered by the owner of a complementary business. It was at this point that we were called in to advise on the planned expansion.

Our initial Appraisal showed that the “helpful offer” was not as good as it first appeared – the “friendly” investor was actually rather predatory and was attempting to acquire a majority stake for a minor investment.

Interestingly, our Appraisal also revealed that stronger cash-flow management would remove the need for new funds. The main requirement for the business was for a more formal management structure to reinforce and communicate the enthusiastic and effective leadership of the directors.

We suggested that changes to operating systems and the management structure including the appointment of two new members of staff and the introduction of more robust credit control would ease the financial pressure on the business. Additionally the new structure allowed real responsibility to be passed to a newly appointed Operations Director with the MD reviewing his role and taking on more general management duties beyond his operational activities.

These changes resulted in a more dynamic business and allowed us the opportunity to re-negotiate the bank facility on better terms and without the need for any personal guarantees. No inward investment was required.

Further longer-term advice enabled the majority shareholder to take early retirement and complete the handover to her son with the support of a non-executive director who was now familiar with the business as a result of his involvement in the Appraisal process.

Increasing sales, a move to more prestigious premises and exciting diversification plans bode well for the future with financial stability and no dilution of the family’s equity position.

This story serves as a good example of how an outside perspective can help prevent relatively innocent minnows being swallowed up by apparently friendly sharks as well as demonstrating that new funds are not always the only answer!

There is little doubt at present that the banks are doing some very wierd things – especially in the business sector.

Several reports reaching me that banks are deliberately squeezing small business clients by withdrawing overdrafts and covertly reducing factoring facilities. While giving lip service to the Government’s alleged support for SMEs, in practice this seems the last thing the banks are actually doing. And yet – just last week I arranged short term extension overdraft facilities with two banks to give vital short term support to small businesses, so not all bankers are bad!! (Although one did charge a three figure sum for a very small extension.) Some real consistency would be most welcome.

More gripes, ridiculous interest rate margins – business and personal sectors – and huge fees for simple facility renewals. Generally not a very encouraging picture. But at the other end of the scale investment bankers are talking to us about innovative new structures to enable funding multi-million dollar projects, so clearly there is still an appetite for turning an honest dollar, pound or euro. It’s strange how swiftly things seem to be returning to ‘normal’ in some areas – surely it’s only a few months ago that the financial world was in terminal meltdown?