BES minutes 24 April 2024
Meeting details
Date and time: 24 April 2024, 9:30am to 11am.
Location: County Hall, Lewes.
1. Welcome and introductions
1.1 PH welcomed everyone to the meeting.
1.2 PH asked the meeting to approve the minutes of the last meeting, no objections were raised, and the minutes were approved.
2. Discussion: Access to Finance
2.1 PH explained that the Business East Sussex group meets monthly and covers a range of topics, with the aim of making East Sussex the best place to do business in the UK. He explained that the minutes and learning from this meeting are distributed widely and shared with businesses and partners across the county.
Importance of relationships with your bank
2.2 IN asked if the relationship between a business and a bank is still important in lending decisions.
2.3 AS responded that the relationship is as good as the client wants it to be. In his experience there are three categories of businesses: businesses that don’t want to know, businesses that want to see you regularly, and businesses that know where you are if they need you. AS noted that the hardest thing is engaging businesses, as banks often have solutions businesses are often not aware of.
2.4 TM advised that his bank focuses on the management team of a business, and this is often more important than their accounts. ST agreed that if the management team can demonstrate capability, they can usually make the finance part work.
2.5 IN asked whether businesses generally explored finance options with their bank first.
2.6 DS noted that they do, but the bank wants to look after them as a customer as well. Therefore they often refer them on to other providers if the bank doesn’t have the appetite to lend to them.
2.7 SD noted that LDBG Finance often provide financing to small businesses, and that these sub £2 million turnover businesses don’t often get the relationship service from their bank. PH added that he knew some £10 million businesses that didn’t get that service either.
2.8 ST noted that all banks are different, and that he personally supports businesses between £250k and £10 million.
2.9 CM noted that Handelsbanken are focused on having relationships with the businesses they work with, and if a business just wants an account with no need for a relationship, they might be more suited to another bank. CM continued that for them it wasn’t about their size, but their needs and plans for the future.
2.10 CM advised that it is easier with established rather than fledgling businesses, as lending is usually secured by assets that new businesses don’t have. He noted that overall Handelsbanken don’t want to dilute what they can offer their clients simply to reach more businesses, they want quality relationships over quantity.
2.11 AA commented that overall they didn’t want to lose customers, and if we won’t lend to them but others will, then AA will tell them. AA noted that this hadn’t always been the case. CM agreed and noted that now when businesses are turned down for finance, banks have a regulatory obligation to signpost alternative sources of finance.
Accessing Finance for Start Up Businesses
2.12 PH asked about accessing finance for start-up or seed ventures.
2.13 TM noted that start up funding is difficult for banks to do, and if Metro are unable to support the lending, they refer these clients onto Start Up Loans run locally by Let’s Do Business Group. Metro are happy to open the bank account.
2.14 LD shared that they often have to ask businesses what finance they have to back their innovation project? She noted that the new East Sussex Economic Growth Strategy notes the importance of accessing the right finance and the right time.
2.15 PH asked the group about funding innovation projects and added that there can be a six-month gap between businesses being awarded Innovate UK funding and receiving the funding.
2.16 The group noted that it was unlikely they would lend to businesses as an advance of funding from Innovate UK. There was concern that because of the conditions applied to grant funding, funding was not guaranteed and that made it challenging for high street banks.
2.17 BD noted that while there was a large network of finance providers and government support, most innovation funding comes from the USA.
2.18 AA noted that for businesses that are trying to develop new innovations and products, equity funding may be more suitable than debt funding. There are trade offs with equity funding, and the earlier an entrepreneur seeks equity funding the more of the businesses they will have to give away.
2.19 CM noted that funding new innovations was more achievable if the business has assets and existing business. But businesses can’t insulate the established part of their business from a new venture and expect to be granted loans. AS agreed, banks need to see that the owner is also committed and has put something of their own into the venture, they can’t ask banks to take a risk they are not willing to take also.
2.20 PH asked the group who a business should go to for advice if debt or equity was the right choice for raising finance. ME added that we needed a local guru to which we could refer businesses to for advice.
2.21 The group noted that businesses can ask their bank, but that for most businesses they should seek this advice from their accountant. AA noted that for loans businesses would need a business plan and forecasts, and they would often need support from their accountant to do this. TM agreed, and noted that accountants are a regulated profession, so if an accountant has signed off a business's plans that is big tick in the business's favour when assessing the overall case.
2.22 PH clarified that our advice to businesses should be start with your accountant. BD agreed but noted that it does depend on the accountant, some do not provide this level of support to their clients.
2.23 CM agreed but noted that if a business has prioritised getting the cheapest accountant possible, they may not be getting the best service, they get what they pay for. TM added that it was similar to hiring a plumber, businesses should seek recommendations from their network. CM added that getting the right advice at the right time was critical, as your early actions can inhibit your options further down the line.
2.24 IN advised that businesses can ask their local chamber, who can connect them with accountancy firms who are members, and SD added that the local enterprise agency can also recommend accountants to businesses.
2.25 LD commented that a good test for her was if an accountant knew about R&D tax credits. If they don’t, they are probably providing more of a bookkeeping service and not looking after the future of a business.
2.26 PH asked the meeting about finance options for established businesses.
2.27 The meeting noted that it depends on the businesses and what they wanted to do. DS noted that established businesses might consider a range of options from their bank, to venture capital, or private equity, but again it would depend on their plans.
2.28 AA advised that he wouldn’t recommend a business consider private equity until they have reached £1 million EBITDA (earnings before interest, taxes, depreciation, and amortisation). He noted that once they have reached this level, they can attract institutional investors and get a better deal.
2.29 SD noted that while this was an option for some businesses, the vast majority of businesses in East Sussex are not large enough to access these options. He noted that the rise of FinTech businesses, while great businesses, had not been helpful in this area. FinTech lending decisions are usually algorithm driven, and don’t require businesses to have the business plans in place for them to succeed.
2.30 PH asked about crowdfunding. SD responded that most crowdfunding is focused on seed or early-stage businesses. TM advised that crowdfunding can be a risk for banks, as they are unable to be sure where the initial funding has been derived.
Supporting businesses to ‘Scale’
2.31 PH asked the group how to support scaling businesses to access the finance they need to continue growing.
2.32 LD noted that the new East Sussex Economic Growth Strategy notes the importance of supporting scaling businesses to access the right finance and the right time to support their growth. KT added that the Strategy also has a strong focus on improving productivity, and ensuring businesses can scale and access finance contributes to that.
2.33 SD noted that East Sussex does have more challenges than access to finance, including transport links, our business demography, and skills.
2.34 IN noted that in order to support businesses to access the right finance, we need to do more than distribute information. IN suggested we hold an event to help raise awareness of finance options.
2.35 GS agreed that for him and his business, not knowing what their options were was the hardest prat. GS noted the lack of a central point to ask questions.
2.36 TM noted that business mentors can often help businesses explore different finance options. He noted that we should be encouraging the use of business mentors as they can be helpful to businesses in a number of ways.
2.37 CM noted that there was a gap between the often government backed finance options for start-ups, and large businesses that can access bank support. The businesses between these groups often struggle to access financing.
2.38 PH commented that it's important businesses understand why they aren’t getting funding. PH and CM raised the possibility of drop-ins with bank representatives for businesses.
2.39 SD noted that LDBG Finance has been involved in Roadshows with NatWest, where businesses can attend and speak to banks, other finance providers, equity investors, and crowdfunders. They have recently held an event on Basingstoke and have one scheduled in Crawley in June.
2.40 SD added that these weren’t well attended, and that it's likely businesses want a conversation when they need finance but won’t attend events on accessing finance if they aren’t currently looking into it.
3. Round table updates
3.1 LD advised that the University of Brighton are offering 50% discounts on Help to Grow Management courses, which are part funded by government. SD advised that a couple of his colleagues had been on the course and found it valuable.
3.2 LD updated the group on business support programmes run by the University of Brighton. LD shared that a new round of ProfitNet is beginning in June and accepting enquiries from businesses. ProfitNet is a peer-to-peer innovation learning group that takes place over ten monthly meetings.
3.3 LD noted that the University do lots of work to support businesses with R&D funding, and that working with the University can increase a businesses skills. There are also Knowledge Transfer Partnerships which can help businesses use University expertise to overcome challenges in their business.
3.4 IN advised that he was from Uckfield Chamber and has over two hundred members with events taking place every month. He noted that members that put the most in get the most out of the Chamber. The Chamber are running the Uckfield Business Awards, and IN asked the group to encourage businesses to apply and enter. They hold the awards every two years, there are fifteen categories and take place over a dinner at the East Sussex National.
3.5 SD shared information about Hastings Chamber and upcoming events, including a meeting with the Hastings Fishermen’s Protection Society. There is also business to student networking event with East Sussex College Group later in the month.
3.6 ME thanked the group for all the information they had shared throughout the meeting, and that he has taken plenty away to share with his clients.
3.7 VO shared information about the new immersive classrooms that are being installed at East Sussex College Group. She also shared information about an upcoming skills workshop with local employers.
3.8 LD further added that Digifest would be taking place in Eastbourne during the autumn and asked the group to please come along and promote to local businesses. PH noted that a meeting of this group would be taking place at Digifest.
3.9 GS noted that his businesses had taken advantage of R&D tax credits over the years, but that recently it had become much harder. He noted that it felt deliberate, and the effect of this was stifling local innovation. He asked if the group could consider lobbying government about this matter.
3.10 DS added that while the meeting had focused on debt and equity financing, he would note the importance of cash also.
3.11 AA noted that he was pleased to have a forum to discuss the equity gap, between the funding that is available for start ups and the funding options that are available for larger businesses. He noted that the lack of options for businesses in between is a challenge to business growth, and probably something that would need central government intervention and funding to correct.
3.12 BD added that while access to finance is a challenge, liquidity is a major challenge also that we need to remember.
4. AOB (any other business)
4.1 The next meeting will take place on Wednesday 22nd May 2024 from 12:00 to 14:00 at Marine Workshops, Newhaven, BN9 0ER.
Summary of actions
None.
Attendees and apologies
Attendees
- AA, Adrian Alexander, FRP Advisory
- AS, Andrew Springall, Barclays
- BD, Brian Drinkwater, Kyle Partnership
- CM, Chris Mizen, Handelsbanken
- DS, Dan Silby, NatWest
- GS, Gary Stevens, Focus SB Ltd
- IN, Ian Noble, Uckfield Chamber of Commerce
- KT, Kane Tudor, East Sussex County Council
- LD, Lorraine Davies, University of Brighton
- PH, Paul Hetherington, Chair of Business East Sussex
- SD, Sean Dennis, Let’s Do Business Finance / Hastings Chamber
- ST, Steve Telford, NatWest
- TM, Tom Meggison, Metro Bank
- VO, Vicki Orbell, East Sussex College Group
Apologies
- AC, Ana Christie, Sussex Chamber of Commerce
- CE, Christina Ewbank, Alliance of Chambers East Sussex
- KB, Kerry Barrett, Lewes and Eastbourne Councils
- JS, Jo Simmons, South East Local Enterprise Partnership