Last week I was in Southampton for the annual general meeting of the Southern Society, South East regional director Fay Webster updated me on access to finance in the region.
Fay has recently hosted a series of ‘Accelerator Funding’ events with Finance South East (FSE), a privately governed regional funding organisation backed by the South East of England Development Agency (SEEDA). With access to public and private resources, FSE specialises in the identification, funding and development of ambitious, high potential growth businesses and has already helped companies in the region raise over £30million.
ICAEW SE/FSE events in Gatwick, Oxford, Portsmouth and Maidstone have helped spread the word to our members about available sources of finance in the region. FSE have been delighted to engage with chartered accountants in practice, who are able to disseminate the information to their SME business clients, and with members in business.
One fund financed by SEEDA and managed by FSE that is bound to be of particular interest is the Transition Fund. This provides loans of up to £150,000 for developing SMEs in the SEEDA region that are facing liquidity issues arising from the credit squeeze.
The mezzanine loan is available to businesses with a minimum turnover of £1 million and up to £35 million, to bridge the gap between the amount of finance businesses are able to raise from the commercial sector and the amount they need to survive and grow during this period of economic instability.
The loan is unsecured, however, security may be required by way of a mortgage debenture. The initial term is up to 12 months with no capital repayments or interest payments until maturity. Interest is 1% per month, with an additional 10% mezzanine charge of loan advance payable at maturity - some circumstances may allow a reduced charge, for example where security is provided. There are no arrangement fees.
SMEs applying for a Transition Fund loan should be able to demonstrate sound, steady development of the core business in its sector over the past three years. Companies will be facing cash flow difficulties brought about by unexpected changes in funding lines or trade credit and should also be operating in a market which is not fundamentally oversupplied.
This is one example of how chartered accountants can be helping businesses access finance during the economic downturn. I would be very interested to hear about others from around the country.