Advice on Raising Finance
When you approach a lender for a term loan or overdraft, the lender’s primary concern is your ability to repay both the principal and the interest within a defined timescale. They will look at your business plan, assess the risk and make a decision on that basis. Lenders will look closely at your sales, profit and cash flow projections to assure themselves that your company is in a strong position to meet its obligations. They will, also, want to know what security you can provide to safeguard their loan.
If your business requires finance, there are two options: you can either borrow money (Debt), or you can seek support from investors (Equity). Choosing between debt and equity is not necessarily an either/or decision, as many businesses raise cash through a combination of both.
Legal Issues
Incorporation
When a business incorporates, it is advisable to put in place a Shareholders’ Agreement. This document will summarise the rights, powers and responsibilities of the various shareholder classes within a company and should be drawn up in conjunction with your legal advisers.
Intellectual Property Rights
Intellectual Property Rights (or IPRs) protect the technology, designs, brands, creativity and skills that many businesses are built upon. They can be used to substantially increase the value of a business and to prevent competitors from being able to make use of the technology which is core to the business.
Tax Incentives
The Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS) are designed to help smaller higher-risk trading companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies.
The Research and Development (R&D) Relief and the Patent Box tax regime (Patent Box) are designed to encourage trading companies to invest in research and development and to retain and commercialise existing patents and develop new innovative patented products.
Creative industry tax reliefs (CITR) are a group of 4 Corporation Tax reliefs that allow qualifying companies to claim a larger deduction or in some circumstances claim a payable tax credit when calculating their taxable profits. These reliefs work by increasing the amount of allowable expenditure. Where your company makes a loss, you may be able to ‘surrender’ the loss and convert some or all of it into a payable tax credit.