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Two key parties have the power to shut down your business.

They are the bank and the taxman. The journey of the entrepreneur does not always allow for forward planning. The business may encounter a problem when it is short of cash. 

Ensuring the business has the right capital structure in place (whether it be Venture Capital or Private Equity investment) is vital.

If they do, maintaining a calm approach, and forming a plan of action can be critical in guiding you through these growing pains. Taking the bank and HMRC in turn, we explore the key questions entrepreneurs should ask themselves and discuss with trusted advisors.

The Bank

What type of funding do you need? What do you already have in place? What is the right fit for the business’ future? 

There is not a one-size fits all solution to plugging a short-term funding gap, and panic can often send businesses to seek lending at extortionate rates, without having fully considered all options available to them. For example, if you are a software-intensive company, you may want to consider enterprises that lend against your future R&D tax credit. Equally, rather than requesting a further loan from an existing lender, it is worth going out to the market to sense-check the rates you are being quoted, to help prevent become increasingly indebted without a clear vision of repayment. 

The right advisor will assist you in assessing each of these questions in order to find the right solution. This will prevent you entering into a spiral of short-term debt, with the possible consequences being the bank knocking on your door and potentially repossessing your assets.

The Tax Man

Are you behind on PAYE or VAT payments? Have you calculated your R&D tax credit correctly? 

The timing of various payments due to HMRC may be difficult to keep on top of, particularly if you do not have the appropriate level of internal or external finance support and advice. There are two key ways to help avoid HMRC knocking on your door: 1) seek sufficient support, internally or externally to assist; and 2) do not be afraid to pick up the phone and discuss your situation with HMRC. 

Ensuring your R&D tax credit claims have been calculated correctly and are supported by documentary evidence is crucial in ensuring your business receives cash payments from HMRC in a timely manner, thus helping to create realistic cash flow expectations and avoiding lengthy rounds of enquires that can become expensive to resolve. Furthermore, you may feel in an impossible situation when you are behind on VAT or PAYE payments to HMRC, but if you contact them early (either directly or through an advisor) and discuss entering into a payment plan, this can be immensely helpful to ease the immediate pressure. 

In short, assess your options calmly and form a plan of action – don’t let the bank or HMRC be the ones in control of your business.

You might also be interested in… Raising finance.

As an entrepreneur, raising money demands time you may not have. After all, business still needs to keep going – and growing – while you seek more working capital or funds to accelerate growth. Our team has the expertise and investor links to help you weigh up raising equity or debt finance with private equity firms, venture capitalists, family offices, corporate investment, banks or venture debt providers. 

So what type of funding is right for you? 

Depending on your specific goals, you may be suited to equity, debt, or a mixture of both. Whichever finance is right for you, we’ll help you to build a robust picture of the plan for funding in order to attract investment. Use us as a sounding board on how best to position yourself, model cash flow and identify which investors are the perfect fit.

Equity finance

If you’re looking for a long-term business partner to provide the funds, contribute ideas and advice, (but also share the profits), equity finance may be for you. But finding the right partner to share in your growth journey is crucial to your business’ success and attempting to navigate the funding market can prove challenging without the help of a corporate finance adviser. We’re experts in shaping transactions, considering all elements of the deal structure (not just headline price) and understanding what this will mean for future value. If your business has a £1 million+ run-rate revenue and you’re looking to raise £2 million+ in funding, fill out the form to get in touch with our experts to discuss equity finance.  

Debt finance

If you’re concerned about diluting your ownership but require funding for a transaction or growth, you should consider debt finance. When thinking about borrowing money, your first port of call may be a bank, and while the main high street banks offer the best value of money, it is important to consider venture debt providers who are often more flexible in meeting your borrowing requirements and the debt structure. We can help you to assess your capacity for debt finance and find the right form of debt, with the right lender, on the best terms. If your business has a £2 million+ run-rate revenue and you’re looking to raise £2 million+, fill out the form below to discuss debt finance.

Looking to invest?

If you’re a fund, we can provide concise commercial and financial due diligence to give you invaluable insight into the business in order to support your investment process.