By John Jardine, LB Corporate Finance – from Suffolk Business

These are trying times for business leaders.

Some commentators are saying that the banks may have turned the corner and be on the road to recovery, but the rest of the economy is still suffering. Britain has entered what looks likely to be a deep and prolonged recession, and finance is still in short supply.

True - the banks have started to lend again, but they are being more cautious than they were this time last year. LB Corporate Finance has helped some of its clients get good deals recently but the situation is unlikely to return to what most would regard as 'normal' for some time to come.

So where else can companies go to get the cash they need?

Venture capital trusts are one alternative. Businesses often steered clear of them in the past. In return for their investment, they expected a stake in the business and a seat on the board. Some set what people saw as unreasonable targets for annual growth.

While this may still be the case in pure venture capital situations, some trusts now offer alternatives that businesses will find much more acceptable.

At LB Corporate Finance, we work with three such organisations - trusts that provide senior debt, mezzanine finance and junior equity. All take a longer-term view, investing in businesses that have experienced management teams, a track record of profitable growth and sound business plans based on robust forecasts.

They are prepared to inject £500,000 or more into companies they view as low risk and that have some form of security available. The costs are comparable to bank finance, and the fact that finance can be available on an interest-only basis is extremely attractive. The recession has made cash flow a concern for some of our customers, for example.

Another option is the Capital for Enterprise scheme. This is part of the Real Help for Business programme that the Government announced in January. Managers have just been appointed to operate the scheme, so funding will soon be available. The scheme has £60 million to invest and companies can apply for amounts between £200,000 and £2 million.



We have a good relationship with the firm that will manage the scheme in the south of England, and think this is an offer quite a few businesses will find attractive. Firms will need to be going concerns with solid track records. On top of that, they must operate in growth markets where they can earn strong margins and be well-equipped to defend their strong competitive positions. Pricing is flexible and both equity injection and mezzanine finance are available.

These are just quick overviews of the two options, of course. In both cases, 'small print' applies, so firms will need professional advice not just to decide which option suits them best, but in submitting their proposals.

To find out how LB Group can help you raise additional finance, please contact John at john.jardine@lbgroupltd.com or call 01206 867551.