Updated: Aug 8
Expert advice is essential when raising funds. But how do you find the right expert and what type of corporate finance firm do you need? Recent articles by the Corporate Finance institute in the Uk speaks specifically about why using a corporate finance firm with a good reputation is important when seeking advice.
Getting funding is a hard job but it can be made a lot easier by employing an expert to help. An expert will not only help the deal run more smoothly, but they’re useful to help pinpoint possible flaws in your plans (for example, are you pushing the business in the wrong direction, is your management team up to scratch?). Experts will also help you identify alternative sources of funding and introduce you to useful contacts.
To gain funding, you will have to spend time away from your day-to-day business role, especially for the larger equity funding options which can take up to six months, and you still might not get the finance. An expert can guide you. The cost may seem high, but the long-term benefits of growth far outweigh the short-term costs of expert advice.
Finding a good expert will be the hardest part. Contact your local Business Link and speak to an adviser. They can provide an objective assessment of your needs, and they will also use their expertise to search a national database of advisers, providing you with at least three recommendations.
Try and get recommendations from friends and business contacts, ask your accountant and bank manager, or go to professional bodies such as the Law Society. Whoever you choose, it’s important to select an expert who’s right for your business. Make a shortlist, then meet them and discuss your business needs and look at who they have worked with in the past. Ideally you are looking for someone who can not only help you gain finance, but also someone who understands your company.
■ What sort of information and advice you can expect from the expert ■ How often you will meet, and for how long
■ If you will be able to call them in a crisis
■ What areas they will cover ■ What you will need to do yourself
■ What results you can expect
Be clear also about how much effort you are prepared to put into the relationship. To make the most of your meetings, make sure you have all the key facts and figures ready. Otherwise, you may waste the meeting hunting for information. You’ll also need to make sure you follow through on the adviser’s suggestions if they are to have any impact.
Where possible, agree specific targets and interim milestones and deadlines. Be honest and communicate, letting them know if you are unhappy with the way things are going. And check whether they feel that you have lived up to your side of the deal.
Likely to be one of your first outside sources of help for all fundraisings, along with your legal adviser. Charges will partly depend on the amount you raise. For larger sums, you typically pay 1 per cent of funds raised. Otherwise an hourly rate of £300 to £500, or £275 to £400 outside London, is standard.
You cannot raise equity finance without a legal adviser. Fees for raising £500,000 in venture capital would typically cost between £25,000 and £50,000. For a flotation, fees would range from £50,000 to around £90,000.
These sit between cash-hungry businesses and prospective lenders or investors, and can help both to source and secure all types of finance at a higher level. Charges are usually made up of a series of fixed fees, an engagement fee, closing fee and possibly commission based on the monies raised for you. Fees may be as much as 7 per cent for deals under £1m, but 2-6 per cent for larger deals. Caban Capital offers this service.
Financial PR adviser
A financial PR adviser is necessary for a market listing, where profile and contacts help raise funds. They typically charge a retainer of £2,000 to £10,000 a month. Some accept a project or success fee. Caban Capital offers this service.
NOMADs and corporate advisers
Companies listing on AIM must employ a nominated adviser (NOMAD) to ensure they meet regulatory requirements. Expect to pay a flat fee of £100,000 to £400,000, plus around 3-4 per cent of funds raised.