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ALTERNATIVE FINANCE 2-10

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The award-winning novelist who owes it all to crowdfunding

The ultimate strategist: How to think like Sir Alex Ferguson

The stem cell research that’s helping people walk again

November 2014 | business-reporter.co.uk

René in the running for top journalism prize

Going up in the world

Ryanair’s Kenny Jacobs on why change is in the air

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René Carayol has been nominated for the PPA Independent Publisher Writer of the Year award

PLUS Business Reporter has been shortlisted for the Risk Management Journalism award by the IRM

Business Reporter · November 2014

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Alternative finance

Opening shots René Carayol

M

A N Y are starting to wonder whether the phenomenon of crowdfunding is beginning to get out of control, with new sites appearing nearly every week.

At its most simplistic, crowdfunding is like having thousands of like-minded people prepared to invest whatever they can afford to lose in your business, initiative or venture online. Some have described it as democratic finance, allowing start-ups access to money while bypassing financial institutions and venture capitalists. Given recent macroeconomic concerns, it is becoming increasingly attractive, but it can never be the total solution.

The dark macro-economic global storm clouds have been gathering in recent weeks, and are being fuelled by a significant drop in the price of oil, with the Saudis deciding for once not to reduce their oil production, which brought further jitters, especially to the Russians. This was closely followed by concerns in emerging markets suffering mainly from China’s squeeze on acquiring raw materials.

If that wasn’t enough, we have seen even more alarm arise from the horrific actions of ISIS in Iraq and Syria, ongoing unrest in Ukraine and, most recently and perhaps most

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THE ESSENTIALS

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The food chain of funding for business has moved in a way no one predicted worryingly of all, the rapid escalation of the Ebola pandemic across West Africa.

A measure of volatility known as the “fear index” has increased alarmingly since the exuberance of the summer. Two high-profile initial public offerings of the challenger banks, Albermarle and Virgin Money, were pulled, both stating market volatility as the reason.

While this is going on, the UK is more than holding its own, but at the micro-economic level the burgeoning number of start-ups in the UK have had to find alternative funding.

If we go back to the days of the dotcom boom in the 90s, Europe, and the UK especially, was home to a young, hot and vibrant venture capital industry. Fast-forward to the past five years and the world of funding has been turned upon its head. The food chain of funding for businesses has moved in a manner that no one would have predicted.

In the late 90s venture capitalists slowly became the source of funding for start-ups, with banks getting far more involved after the young businesses had proved that they

were viable, and private equity tending to get involved only when they had become sustainable and were looking to significantly develop the business or scale up to become multi-national.

That is a very different story from what is being experienced today; venture capitalists have become banks, and banks have become private equity, and private equity is full of cash, but seemingly far too risk-averse to get involved in anything but the safest options.

With a record 500,000 start-ups for 2013, this scenario has many of them having to go either the “bootstrap” route, or try out the crowdfunding phenomena. This is not a satisfactory or sustainable situation.

A look at a couple of the most popular crowdfunding sites in the UK, Crowdcube. com and Seedrs.com, which between them have more than 700 businesses listed on their sites with Crowdcube having raised more than £15million, and Seedrs having raised more than £2million. Interestingly enough, both sites have had 80 per cent of the businesses that have looked for funding withdraw, because they haven’t raised enough money. This is vital as it brings in a level of self-selection – in other words, not every half-baked idea will work.

Crowdfunding is establishing its appropriate and necessary place in the funding food chain, but we do need the VCs and the banks to get fully involved in assisting the flourishing entrepreneurial microeconomic culture of the UK once more.

When we enjoy the water we must always remember the spring that gave it to us.

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Alternative finance

ALT ER F N 2- INAAT 10 N IV CE E

Alt finance easing the pressure on SMBs

Seed funds are giving start-ups a much needed leg up

Small businesses thriving on government seed funds

By Joanne Frearson I N V E S T O R S i n B r it i s h businesses are on the rise, with more and more people using government platforms such as the Seed Enterprise Investment Scheme (SEIS) to put money into new business ideas.

Recent figures from Radius Equity, which offers schemes under SEIS, show that 2,852 start-ups applied to HMRC for permission to raise funds through the Seed Enterprise Investment Sc heme (SE IS) i n 2 013/14, a n increase of 73 per cent on the

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1,644 applications made the previous year.

According to Jeff Lynn (below), founder of equity crowdfunding platform Seedrs, these types of schemes are not only helping to revive British entrepreneurship, but also creating the British leaders of the future.

Seedrs has funded well over 100 SEIS deals. Lynn says: “The economy can live or die based on the success of small businesses. It is well acknowledged that small and medium-sized firms represent the net job creation in the economy.

“It helps business be able to raise funds earlier. Small businesses have this incredible sort of paradox – angel investors and venture capitalists will say to them, you need to build your firm to a certain point before you are investment-ready. It has helped those entrepreneurs take that first step to building a business.”

Lynn believes the best way for the government to help British entrepreneurs is by not giving them money directly, but by giving investors incentives such as tax breaks.

Individuals investing in the scheme can get income tax relief of 50 per cent of the amount

invested, as well as an exemption from capital gains tax on any proceed of sale of a SEIS investment.

For a company to be eligible for the scheme it has to be no more than two years old, have fewer than 25 employees and have assets of less than £200,000. There is also a limit of £150,000 on funds that a company can raise under the SEIS. “In each case it has certainly made it easier for them to raise finance,” Lynn says. “These are all businesses that needed equity capital in order to launch and it made it easier for them to raise it by being able to

Investors look to life sciences and tech sectors PROFESSIONAL investors looking to put their money in SMBs are favouring life sciences, digital technology and commercial property, according to Robin Rowland Hill, CEO of Ruffena Capital.

Hill says: “Our particular audience is professional investors who are typically self-made men and women. They want to invest in things they instinctively understand and can see how it makes money. They have got to understand how the business works.”

Although Hill says there are “ebbs and flows in what people want to invest in”, currently life sciences, digital technology and commercial property are proving attractive investments.

But it all depends on the investment proposition of a company as to what makes a good deal or not. This can vary depending on the sector.

According to Hill, in life sciences it is about the company having a good patent field and being able to bring a product to

scale, while in digital technology it is about the route to market and whether a company can defend their product against other competitors.

He says: “The UK has a lot of good life sciences technology. There is a revolution going on in that area. The other one is digital technology. There is a lot of interest in platform technology.

Commercial property there is definitely an appetite for that. In property you can generate a double-digit return.”

offer these tax incentives to investors.”

It also helps by reducing their risk, Lynn says. “It means that a £10,000 investment actually becomes a £5,000 one. You have a fraction of the risk and a fraction of the capital exposed.”

ALTERNATIVE finance options such as factoring, invoice discounting and asset-based lending is helping small and medium businesses (SMBs) to build up their business as they grow and help them overcome difficulties they could possibly experience if partners pay them late.

Jeff Longhurst (below), CEO of the Asset Based Finance Association (ABFA), says: “There is still a tendency for small businesses to become very dependent on one or two major customers.

This puts them a little bit at risk if a customer decides to move elsewhere or decide to change their payment terms.

“Invoice financing gives them the working capital as they grow so they can take on new orders and know that they can fund new business going forward.”

To also help SMBs be able to respond if one of their partners suddenly pays them late, the ABFA is working closely with the Institute of Credit Management on a better payment practice.

Business Reporter · November 2014

Alternative finance

IndustryVIEW

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Mind the funding gap Big ambitions of new entrant in the peer-to-business finance sector

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he proliferation of alternative business finance providers has come at a much-needed time – while SMB lending by the 36 banks participating in the Bank of England’s Funding for Lending scheme decreased by £400million in Q2 alone this year, peer-to-business lending delivered more

than £140m in the same period.

While SMBs seeking finance of less than £1million thankfully now have a multitude of alternative providers they can obtain finance from, those requiring a larger amount of funding continue to suffer from tightening credit distribution by high-street banks. And because they are too

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small to access the retail bond market, they can quickly find themselves unable to obtain finance to drive their growth.

UK Bond Network is a new entrant in the peer-to-business finance sector which offers a solution specifically targeted at these businesses. Offering between £500,000 and £4million of debt finance, the platform enables both publicly quoted and unquoted companies to tap into a pool of sophisticated investor capital that would otherwise be inaccessible to most UK SMBs. Because UK Bond Network is only open to sophisticated investors, and these investors are experienced enough to understand complex financial structures, the company can be highly flexible in the structuring of the finance it provides – a significant differentiator from most peer-to-business finance providers.

Each bespoke bond is built around the specific business goals of the particular borrower, with the option to offer additional upside, be it equity-linked or otherwise, to achieve a lower headline borrowing rate.

Having recently opened a partnership with GLI Finance, a leading investor in the SMB finance sector, UK Bond Network is now moving to either partially or fully underwrite the finance it provides to companies. This means businesses seeking finance are guaranteed to be successful in obtaining funding once accepted.

Business owners and executives are looking for more than simply finance at a competitive rate; they want clarity,

Case study Integritie, a cloud-based content services provider to blue-chip clients globally whose head office is in Portsmouth, raised £1m from UK Bond Network in October. Michael Veenswyk, CEO of Integritie, commented on the process: “We selected UK Bond Network as they provide an exciting new way to raise money without losing equity.

“The outcome was impressive; we received a valued finance solution that enabled us to focus on our strategic growth goals. Christopher Maule, CEO of UK Bond Network led the project. He and his team worked closely with Integritie, providing clear value-add counsel to ensure that our funding requirement was met.”

transparency and guidance throughout the funding process. With a management team possessing long-standing records in debt provision and an efficient new method with which to use these skills to deliver finance, UK Bond Network is perfectly placed to serve businesses finding themselves in this crucial funding gap. +44 (0)20 3701 0120 businesses@ukbondnetwork.com www.ukbondnetwork.com

Lenders: always there when you don’t need them

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t’s the age old adage heard from small business owners and CEOs alike.

Anyone who has managed a business in transition understands, sometimes all too well, how rapidly liquidity dries up, even when it seemed so readily available only months or even days before.

Traditional lenders, consistent with their mandate, provide low-risk capital in exchange for a modest return. As part of the bargain they are the first to be repaid in the event that things go wrong – modest return for modest risk. This is the job of a financier – done well by lending money in volume and by not losing it. Hence the focus on very stable, profitable companies.

It’s clear to see when sales and profitability are up, lenders are lining up. When things are down, they are not. It’s easy to get agitated about the perceived injustice of it all,

but it helps to remember that deposittaking institutions are primarily investing the money from our savings accounts, so some prudence is appropriate.

Taking the banks’ appetite for risk into account, it doesn’t take much deterioration in performance to move a company into the “un-bankable” category.

What often follows is a reduction of credit, leading to a downward spiral. The traditional lenders’ tolerance for various forms of risk and their institutional constraints often govern these actions, leaving limited room for manoeuvre.

Luckily, the UK and other European credit markets are maturing and gradually catching up with the sophistication of the credit markets in North America.

The bond market, direct lending funds and insurers are all becoming more active across the capital structure, which is a boost to the vitality and diversity of credit options for potential borrowers.

The direct lending funds, including alternative credit providers, often focus on working with companies which are not best served by the traditional lender.

Businesses in transition may find the

options provided by these institutions much more suitable to their needs. A tailored structure is often necessary, blending elements of debt and equity in a customised product. While larger firms and PE-backed companies are often more familiar with this territory, awareness is increasing among mid-sized businesses as well.

It is essential for potential borrowers to have a degree of awareness as to why the alternative lenders are comfortable when others are not, how they are funded and their expectations of return. It may be that

the lender has a greater understanding of the value of assets, specialist sector expertise, or an appetite for equity risk. Understanding these dynamics will help set expectations for the new relationship, which could make all the difference, giving management a chance to succeed.

Eli J. Appelbaum (left) is MD, investment & finance, Gordon Brothers +44 20 7647 5142 e.appelbaum@gordonbrotherseurope. com

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LTERNATIVE finance initially created to fill the gap left by banks scaling back funds to small and medium-size businesses (SMB) following the financial crisis is starting to become the preferred first choice for companies to gain access to cash.

Its growth is set to continue, as the government introduces the Small Business, Enterprise and Employment Bill.

The new statute is going through the House of Commons and the government is working with Alternative Business Funding (ABF), a collaboration which brings together all the main players of the alternative finance industry under a single web portal, to develop it.

Adam Tavener, a catalyst behind the creation of ABF and one of the driving forces behind the development of the legislation, says: “We made representation to the Department for Business, Innovation & Skills (BIS) and the Treasury late last year, and said to the government that they could improve access to finance the SMB sector at no cost to the taxpayer.

“The suggestion to ministers was to mandate banks to refer SMBs which had been declined credit to an approved platform containing a number of different alternative financing propositions.

This was accepted, and is making its way through parliament under the Small Business, Enterprise and Employment Bill.”

Tavener is clearly excited about the prospect of the new bill, and believes it will create a more efficient and fair environment for the alternative finance sector to compete in. Although the alternative finance industry is certainly gaining popularity, what it cannot do is compete poundto-pound with the marketing budgets of the big banks. This will go a long way to making the industry more known for SMBs. The government is now looking at the details as to how this piece of legislation might work. The next step is putting together the framework on how the major banks will push the referrals across and how the alternative funding industry will receive them and distribute them to an appropriate funder.

Tavener, who is also the chairman of Clifton Asset Management and Pensionledfunding.com, an alternative finance firm that allows SMBs to invest in their business using their own pension funds, says: “BIS and the Treasury have jointly assembled a couple of working groups of chief stakeholders, who can input into what they realistically think is a workable system.

“The ABF along with a number of different stakeholders are consulting with the Treasury and BIS on what we are able to deliver in terms of technology, information security and volume, and how we can integrate our systems with the bank systems. What will happen is that the Treasury or BIS will designate a number of platforms for this process. The ABF is intending to be one of the lead platforms. We are currently developing the technology to do that.”

Although the new legislation is a major break for the alternative finance industry, it is only in its beginning stages and access to finance and regulation will be an ongoing issue for SMBs. If regulation is not worked out pragmatically, it could stifle the alternative finance industry growth.

Tavener says: “I think the opportunities are enormous for the main banking sector in collaborating with the alternative finance sector.

What the government has to be careful of is that regulation, while necessary, should not be extended

I think regulation needs to be more pragmatic ABF’s Adam Tavener talks to Joanne Frearson about how the government should not smother alternative funding with excessive regulation to the point where it kills innovation. Regulation and red tape can have a pretty corrosive effect on the ability of small businesses to exist, let alone deliver growth. It can hamper the very significant growth potential of the alternative sector. I think the government needs to understand that, and the regulator needs to understand that.

The regulatory conversation around alternative funding should be a rather different one than traditional financial service product regulation.”

There were concerns from the alternative finance industry after the Financial Conduct Authority increased consumer protection in loanbased crowdfunding in April 2014. These rules allow anyone to invest up to 10 per cent of their available assets into securities-based crowdfunding.

H owe v e r, u n le s s a n i n v e s tor takes advice or has the relevant knowledge or experience, they are not allowed to invest further.

“I think regulation needs to be somewhat more pragmatic,” Tavener says. “Someone choosing to invest their own money into their own business or somebody choosing to invest their own money into someone else’s business by virtue of a peer-to-peer or crowdfunding is actually making a pretty informed decision. They should know it is possible to lose that money.”

Business Reporter · November 2014

Alternative finance

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Taverner does not believe alternative finance should just be left to the sophisticated investors.

Growth in the SMB industry is important as it is helping to stimulate the UK economy.

The participants in the ABF collaboration between them have currently funded in excess of 10,000 businesses across the UK. Tavener points out that is probably going to represent somewhere between 50,000 to 80,000 jobs that have been created by the alternative funding community.

He says: “There have been 1,500 to 2,000 funding deals that have been done since March.

That is volume. You are probably talking about a billion quid’s worth of funding that has gone out the door. I think the economy would really feel it if it was not there.”

Tavener is seeing plenty of demand from the manufacturing sector for alternative finance. He says: “I do not necessarily mean manufacturing in the heavy industry sort of way – I mean technology-driven, new manufacturing solutions.

There are probably logical reasons for that because it is very capital intensive.”

There are also other benefits that alternative finance can bring SMBs, such as deciding whether funding can go ahead in a short space of time. The terms that are attached to funding support can also be less onerous than a more traditional lending arrangement.

He says: “Most alternative funders can normally give you an answer on whether they can support you or not within days, whereas a more traditional solution led by one of the high street banks can take weeks or months to reach the same conclusions.”

Alternative finance is helping to stimulate growth for the SMBs, provide jobs for the nation and is filling the gaps for the big banks. Although regulation like the Small Business, Enterprise and Employment Bill is encouraging for the industry, legislation also needs to be pragmatic to allow SMBs to continue to grow.

Business Reporter · November 2014

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Alternative finance

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Crowdfunding: Putting When Peter Jukes’s live tweeting of the hacking trial took off, his plea for funds helped keep it going

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“IT WAS exhausting, scary, exhilarating, fascinating, heart-thumping and full of adrenaline rushes,” Peter Jukes, who crowdfunded his live coverage of the phone hacking trial, tells me in a bar in London’s South Bank. “Everyone was there, from Hollywood actors to archbishops. You got to know the defendants, the police and the lawyers really well.”

As soon as Jukes discovered he could live-tweet the trial, it became his mission. He already had credentials as a commentator on the subject, through his book The Fall Of The House Of Murdoch, but being a freelance writer he did not have the resources to support himself while covering the trial.

Swallowing his pride of asking for cash and following his dream, he took to crowdfunding site Indiegogo as a way of raising the money.

He says: “I knew the platform, Indiegogo, and I was lucky enough to have a video, as I had just been on CNN. I understood the pledge system. What are you going to give people beyond just a live feed?

CASE STUDY

ex-News Of The World editor Rebekah Brooks during the phone hacking trial

“With the first wave of funding in October and early November 2013, the perks I offered people [who donated] were lunch with me or a talk from me. I asked people to fund me until Christmas, as nobody had any idea how long the case was going to be.”

The amount Jukes (right) raised was enough to cover his expenses per month, and as the trial dragged on there was a second wave of funding so he could continue tweeting about it. Jukes believes the main reason why people funded him was so

other people could get the information about the trial for free.

He says: “The reasoning was because I was truly independent.

I was not working for the BBC, The Guardian or the Mail. I did not, therefore, have an axe to grind. It made me responsive to what they wanted, rather than the editor that has the bias of upper management.”

He has since written a book on the trial, Beyond Contempt: The Inside Story Of The Phone Hacking Trial, which was published

by Martin Hickman, founder of Canbury Press. The money for this was also raised through crowdfunding.

“The model for that was £25 for a paperback and £9 for the e-book, and you get your name in it as one of the individual sponsors,” Jukes says. “For an extra amount, you got a VIP invite to the launch party. A lot of people took that up – you get to chat with me, you get a bigger service.”

The book is already on its second edition and his coverage of the hacking trial also led to Jukes being named the best UK reporter on Twitter and social media in April this year. “It just goes to show life is full of surprises,” he tells me. “Never give up.”

The adrenaline rush of covering the trial is over for Jukes, but his quest to fund projects through crowdfunding has not disappeared. He is currently trying to crowdfund a novel, Sleeping Demons, which is also being developed into a TV series.

Joanne Frearson

Business Reporter · November 2014

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Alternative finance

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money into words After refusing to rewrite his historical novel, Paul Kingsnorth proved sceptical mainstream publishers wrong

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W H E N PA U L Kingsnorth first took his novel T h e Wa k e t o mainstream publ i she r s, he was turned down flat. They told him to rewrite the book in modern English, as it would appeal better to an audience.

But Kingsnorth refused, and after interest from crowdfunding publishers Unbound, he got the book published in April 2014.

Since its release the response has been outstanding. The Wake was longlisted for the Man Booker Prize, shortlisted for the Goldsmiths Prize and has won the Gordon Burn Prize.

“I really did not think this book would get many readers,” Kingsnorth tells me from his home in Ireland.

“I thought hopefully it would get a nice niche readership – obviously it has got a bit bigger than that.

“I had written this book which was quite strange – it is written in its own language (a middle-ground between the Old English that would have been spoken by these characters and the English we speak today).

“It was something I was doing as an experiment for myself. I thought it would be tricky to publish – I had taken it to my previous agent after I had finished it.

“He had sent it to a few normal mainstream publishers who weren’t interested. One of them did ask me if I could rewrite the book in modern English because then they would like it better. I said no.

“I knew John Mitchinson from Unbound as I had met him at previous events, and I had talked to him about my novel. He was interested so I thought I would give him a go – I sent it off to him and he was keen. “ T he g reat advantage of crowdfunding is that by the time the book comes out, you have already got about 500 readers, which is the average sale of a new novel in this country anyway. You’ve already sold 500 copies CASE STUDY

of the book and already have 500 people talking about it and hopefully saying nice things if it is any good. You have that built-in advantage over other models, in a way. You already know there is enough interest by the time the thing is published to actually make it financially viable.”

Kingsnorth tells me that when you publish a book through crowdfunding, the people who sign up become engaged in the process of creating it.

He says: “If you are looking to crowdfund a book, or anything else, the way to look at it is that you are interacting with a community of people who like your work and want to support you.

“It is almost as if everyone who has crowdfunded these books is a micropublisher, and that is the way Unbound treats them – you get your name in the back of the book, or if you spend a certain amount you get to meet the author.”

Kingsnorth offered people interested in crowdfunding his book £10 for a digital version of the book and up to £30 for a hardback copy of the book.

“Then there was a higher version in which you spent £150 and you got a tour of the Battle of Hastings with me and a picnic and a book,” he says.

“The highest level no one actually bid for because it was so expensive – which was a leatherbound Anglo Saxon version of the book.

W h ic h wou ld have been great, except no one bought one of those!

“Quite a number of people will often subscribe at higher levels.

We had quite a few people paying £ 10 0 o r m o r e r a t h e r t h a n the standard amount. It gives people the chance to choose their level of support.”

Having received such massive attention on the book, Kingsnorth says, “shines the spotlight on something

Paul Kingsnorth successfully crowdfunded his novel The Wake after mainstream publishers turned it down

people m i g h t otherwise have not noticed.” After the publicity generated by the Booker prize and other awards, Kingsnorth has seen limited editions of his book sell on eBay for about £300.

He is going to publish his next novel with Faber and Faber. He says: “The

Wake is the first book in a trilogy set over 2,000 years in England.

The first one was set about 1,000 years ago, the second one is going to be a contemporary book… beyond that, it is all close to my chest.”

The book, which details the travails of a band of guerrilla fighters after the Norman invasion of England, has achieved great success and Kingsnorth has certainly proved his critics wrong.

The public have loved its language and characters, and fans no doubt will be interested in reading more.

Joanne Frearson

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Smarter thinking for business on the move INDUSTRY VIEW With the average cost of a car in the UK now more than £27,000, it’s easy to see the appeal of leasing a company vehicle rather than purchasing it and tying up capital.

However, it’s surprising how many SMBs don’t consider this option for their next car or commercial vehicle. Navigating the different leasing options may seem daunting.

Knowing who to trust for expert help and advice can also be a concern.

As Europe’s leading provider of business mobility services, at Alphabet we support organisations of all sizes to meet their mobility needs.

To help growing companies keep moving, we offer an exclusive group of 34 Alphabet partners around the UK who provide specialist vehicle leasing services to SMBs. By combining their expertise with our broad range of funding and mobility solutions, these partners ensure SMBs get the right vehicles for their business. They take the hassle out of choosing, funding and running a fleet of vehicles.

The approach is simple.

Our partners focus on the right choice of vehicle, the whole-life cost of running the vehicle, funding options, tax advice and perhaps most important of all, making sure they’re available when and where they’re needed.

Whether it’s keeping a small sales team on the road, or ensuring a fleet of plumbing vans are out doing jobs, our partners help SMBs get the right vehicles, funding and support they need.

Gavin Davies (below) is Head of indirect sales, Alphabet 0370 50 50 183 www.alphabet .co.uk

Business Reporter · November 2014

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Alternative finance

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Want better supply? Better get up front…

By Joanne Frearson

IndustryVIEW

ALTERNATIVE finance is helping small business overcome cash flow problems which could be due to seasonal factors as well as providing them with the finance necessary to secure better deals with their suppliers.

Paul Mildenstein, CEO of Liberis, says: “Businesses that come to us the most are those that experience great waves in their performance – the leisure and hospitality businesses where a bad weekend can really kill them, particularly if you are in a seasonal tourist location and your bank holiday got washed out.

“Half of the monies that we advance to people are used for stock and for development needs and refurbishment. A lot of people see great opportunity in the marketplace to do supply or product opportunities – somebody is willing to

sell them something for a better price if they put cash up front.”

One of Mildenstein’s customers is a purchaser of alloy wheels for cars – in order to get the best possible price and delivery, the purchaser needs to pay before the product is actually made.

“He came to us and we gave him £200,000,” Mildenstein says. “He was able to secure exactly the volumes he needed for his pre-orders and get them shipped to him immediately. He got a great margin on his product and he paid us back within a month.”

Another of Mildenstein’s customers uses Liberis so that they can stock products cheaply to meet the demand just before Christmas.

“A typical pub that is looking to purchase stock for Christmas always starts around October and November to buy additional wines and foods,” Mildensten says. “But of course the first

Small businesses could get a better deal by paying up front for goods and services

Christmas parties do not start until midDecember, so they have all this stock in ready as they have managed to get it at a good price, but they cannot start selling it until mid-December.

“That does not work for some banks, which want to see their immediate payment of the loans, but we are helping their cash flows as we ask them to pay it back over six months. We get paid back when they get paid.”

The trends Mildenstein is currently seeing include a strong appetite for unsecured small amounts of short-term lending – clients are not looking for enormous loans, they are simply looking for short-term cash injections to develop their business.

Mildenstein is a great believer of the great British entrepreneur. He says: “I genuinely believe that whenever I talk to business people they are buzzing with enthusiasm and ideas, but it is only the purse strings that hold them back from doing that stuff.

“If we can give them something that is an affordable way of getting cash every six to seven months to help them develop their business that is fantastic.

“Some people can have some of the best businesses in the world that are selling loads and loads of stuff, but if the cash is not coming through the system because of the way it is geared up, or costs, or sheer investment up front, that business could possibly go under.”

Broking not banking: the simple way to source finance

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inance 4 Business is widely recognised as one of the UK’s leading finance brokerages. Being whole of market and truly independent, it is able to provide a very succinct appraisal of the market. The resounding message is that lenders are lending, availability to alternative finance providers is on the increase, and there is probably more choice of products and lenders available now than at any previous time.

Russell Martin, director of Finance 4 Business, is very bullish. He says: “Availability to finance options is at its highest level since 2008.

In fact, some may argue that there are more options available now as new lenders have sought to provide solutions to fill the gaps left by the banks’ retraction from the market. Some sectors of finance are becoming crowded as lenders fight to find

space, and as a result we have recently seen downward pressure on pricing.

“The biggest dilemma for clients now is ensuring they can find the right product and, perhaps most importantly, the right lender to partner with. This is where the services of an experienced, independent and whole-of-market brokerage will be invaluable.”

Many data sources highlight that if a client has been declined a request for finance from their bank, well over half would not approach another lender for fear of further rejection. Many clients are still not aware quite how large the alternative finance sector is and what it has to offer.

Finance 4 Business is completing loans worth millions with high street banks.

Moreover, it is completing deals daily with alternative lenders, and this is where the real growth is being enjoyed. Martin highlights some of the nuances that specialist lenders were able to offer, that clients may not know are available:

• R ates from 2 per cent over the bank base rate • Terms up to 30 years • Interest-only payments available

Commercial mortgages • Up to 80 per cent loan-to-value

Peer to peer loans • Unsecured loans of up to £250,000

Residential investment mortgages/BTLs • Portfolio loans • BTL rates from 1.99 per cent (as at 31/10/14) • Availability for ex-pats and foreign nationals Development finance • Up to 90 per cent loan-to-cost on a senior debt basis • Residential and mixed-use schemes • Mezzanine Finance arranged Bridging loans • Up to 100 per cent of purchase price • Interest rates from 0.64 per cent per month • Funds can be available in less than one week

• Terms of up to five years • Funds available in two weeks Other facilities available • Invoice finance • Factoring • Asset finance • Regulated mortgages Martin advises clients to use a broker and not a “dealer”. Many brokers in reality are the latter, placing deals to selective lenders on a restricted panel, as opposed to a whole-of-market and independent brokerage that has all the tools available to find the right solution. Many brokers rely on upfront fees to fund their business and these are the ones to avoid. Multiaward winning Finance 4 Business does not charge upfront fees and relies on providing excellent service and completing deals in line with their clients’ expectations.

Russell Martin (left) is Director of Finance 4 Business 01827 230 045 www.f4b.biz

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Alternative finance

Grape expectations A crowdfunding model has helped celebrated English winery Chapel Down realise its potential. By Joanne Frearson

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NGLISH WINE and beer producer Chapel Down has made history by raising £3.95million in the UK’s largest ever crowdfunding equity campaign, as well as being the first listed firm to raise finance through this method.

“We had used the more traditional fundraising method by going to brokers and talking to high net worth individuals.

In Ju ly 2013 we ra ised £4.35million in more traditional means,” Frazer Thompson, CEO of Chapel Down, tells Business Reporter. “W hat became apparent, though, once it was publicised that we were offering shareholders a third off our wines, was that more and more people wanted to become shareholders.”

According to Thompson, the idea of using crowdfunding as a finance method came when he realised Chapel Down could attract investment through wine enthusiasts, who were more likely to be brand ambassadors

and tell others about the wonderful wines they drank on a Saturday night, rather than bankers looking at the firm’s price-to-earnings ratios.

He says: “For us as a brand and a company that wants to convert people, we wanted to get a congregation of people that would support exactly that initiative and would go out and do the job for us.”

Chapel Down chose online crowdfunding platform Seedrs to help raise the equity – the campaign was so popular it had reached its total £3.95million in just over three weeks.

Thompson (inset) says: “The wine discount people got when they invested proved very popular. It essentially means a bottle of wine that would cost you £21, will cost you £14. You do not have to buy very many of those to get a benefit or a return on your investment.”

Other incentives on offer were 25 per cent off beers and ciders, 25 per cent off a meal

for four at the vineyard’s restaurant, and a free tour and tasting. Investors could also get a third off vine leases which enabled them to take part in harvesting the grapes for the wine.

The money received from the crowdfunding campaign is being used to help expand C hapel D ow n. “ E ngl i sh sparkling wine in particular is going well at the moment,” Thompson says. “We need to plant more land. That is a longterm and expensive thing to do.

We found 400 acres of land and we now need to plant that with vineyards.

“We need to do that over the next three or four years. We are bursting at the seams and we need to build a new winery, our beer has gone fantastically well and to support that we need to build a new brewery.

“The site here at Tenterden attracts some 50,000 people a year currently, but it needs further funds spent on it to encourage more spend to get

t he dwe l l t i me up a nd encourage more people to come here.”

Chapel Down has been extremely successful since its inception in 2001. In 2013 the winery won three gold medals at the Decanter World Wi ne Awa rds.

Sales of its Curious Brew has grown by 570 per cent in the last two years, and in 2012 it won Gold at the International Brewing Awards and the Trophy for Best Lager under 5 per cent.

It also has a growing list of h ig h-prof i le c u stome r s, including Jamie Oliver, Gordon Ramsay, Waitrose, Majestic and Marks and Spencer.

Crowdfunding is something Thompson would definitely consider using again to finance Chapel Down. He believes it is important to start thinking of shareholders in a different way – as people, rather than just someone looking to flip a buck and trade.

“I cannot see why we would not just do this again and do it bigger,” he concludes.

Index shines light on buy-to-let investments PEER-TO-PEER property platform LendInvest has launched an index on the UK Buy-To-Let (BTL) property market which will give investors a comprehensive analysis of the rental sector and inform them about what area is potentially a good investment.

The LendInvest Buy-To-Let Index uses data provided by Zoopla and the UK Land Registry to calculate the average rental yield for all postcodes across the UK. Over the last year, the postcodes EC3, WC1 and WC2 have provided the highest total investment, with a year-on-year gain of 25 per cent, while the worst

performing postcode in the UK, has been the L8 area of Liverpool.

Christian Faes, CEO of LendInvest, says: “We’re aiming to provide investors, on both sides of our peer-to-peer marketplace, with as much information

as possible on the UK BTL market. We are keen to ensure that both our borrowers and our lenders are making sensible and informed investment decisions.

“The LendInvest Buy-To-Let Index shows that BTL property is not always a great investment. There are many postcodes across the country that have experienced negative capital gains. The LendInvest peer-to-peer platform provides investors the opportunity to obtain a very decent return, lending secured against property, but without the hassle and risks associated with direct property investment.”

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9

How merchant cash advances are benefiting the UK’s small business owners

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ith capital-starved small businesses turning to a number of alternative funding options, we, as chartered accountants, identified the benefits of merchant cash advances (MCAs) as the solution to small-business funding woes. MCA looks set to replicate the phenomenal growth experienced in the US, where over the past decade it has become a mainstream funding option, growing from approximately $500million worth of advances in 2010 to an estimated $3billion in 2013.

Simply, an MCA is a convenient way for any business that takes payment via credit and debit cards to raise unsecured funding.

The business receives a lump sum in exchange for a small percentage of its future card takings. Each day, that percentage of daily card takings is automatically collected via the firm’s card terminal to repay the advance.

Where an MCA really sets itself apart from other forms of lending is how the product is aligned with the cash flow of the business. There is no term attached to the advance and an all-inclusive fee is charged.

This means that there is no strain on the business during quiet months as repayments automatically reduce and there are no mounting interest costs to worry about.

The other key benefit is the speed and simplicity of the application and approval process. There is no need for business plans nor security, and we advise within 24 hours whether the applicant has been approved.

Approval rates are significantly higher than regular bank loans because business performance is the main factor in considering an application rather than credit rating.

MCAs offer small business owners the unsecured funding they need in a faster and easier fashion, and look to be the alternative means of finance UK business owners desperately need.

Andrew Raphaely is managing director of 365 Business Finance Limited www.365businessfinance.co.uk andrew@365businessfinance.co.uk

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Funding options: SMEs could be missing opportunities

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viva, the UK’s largest SME insurer, has a strong heritage spanning 300 years, providing insurance and risk management advice to businesses of every size, from corner shops to shopping malls.

Recent research conducted by Aviva with 1,500 SMEs suggests that more than a third of respondents are planning to invest in their businesses this year, which is great news for the UK economy. But when we asked how they would be looking to fund their plans, it seems that many SMEs are not aware of the range of finance options available to them, particularly when it comes to alternative finance.

In fact, as many as a third of SMEs told us they didn’t understand what alternative finance was or how to take it out, and a similar proportion admitted to being altogether unaware of it as a funding option.

The results suggest more must be done to make sure businesses are better informed of the available options. The fact is that although high street banks will always be an important port of call for many SMEs, schemes such as crowdfunding and peer-to-peer lending are now providing a range of different solutions, whether that is to support growth plans, raise working capital, offer shared ownership or to generate valuable customer feedback Businesses looking to secure additional funding equally need to make sure they are aware of every option available to them to help make an informed decision that provides the amount they need for the length of time that they need, fully supporting their business plans.

They also need to remember that any plans that significantly change or diversify their business operations may change their insurance needs. We recommend a discussion with their insurance broker to make sure they continue to have the right insurance protection for the business they have created.

Robert Ledger is head of small business at Aviva www.aviva.co.uk/yourbusiness

Helping you improve your position in the market Small businesses are constantly navigating surprise expenditures and debt scenarios that are impossible to foresee. Now with alternative lending as an option, it provides a pathway to business funding, opening the doors to a new world for the SME, one in which cash on hand can be a contributing factor.

Alternative lending has become one of the most effective avenues in the industry to provide SME owners with access to cash, and ezbob has established itself as a premier lender to that sector. In the past, SMEs looking into borrowing scenarios often hit credit roadblocks and other obstacles hindering the ability to qualify for a business loan. But ezbob has changed the financial picture and capabilities of entrepreneurs in the game, providing a financial solution to many needs.

Quick and easy To apply for a loan through ezbob you start the quick online application process, including your business information and certain data points. Within the hour you will receive a reply and the funds when approved. There’s no arduous application process, filling out forms and providing ample documentation to support a business need. In many cases with traditional banking these requirements remain in effect. ezbob provides funding for all eligible SME businesses in a manner that trumps any other financing option in the modern market.

With access to cash that quickly it allows a small businesses to factor in available cash when making strategic moves to improve their position in the market.

020 3371 8190 ezbob.com

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11- OLL E XECSTR 17 AB NT UT AT E E

O R IO G RA PR N Y TI IS & O E N

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By Tim Adler

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N E T HIR D of top companies are divided as to how to execute strategy, according to P rofessor A ndrew Kakabadse of Henley Business School.

Kakabadse, who teaches governance and leadership at Henley, has surveyed more than 5,000 company boards in 19 countries. And strategy execution, says the professor, is the most important element of a company.

Kakabadse says: “Most strategies are quite good, but it’s the lack of engagement alienating middle management that’s the problem... getting people to buy into your strategy, convincing the management levels below to buy into what you’re doing.”

Henley, one of the largest business schools in the world, has noticed a trend for British companies to parachute in chief executives to turn around companies quickly. In America, it is much more common for companies to promote from within.

Oliver Parry, corporate governance adviser at the Institute of Directors, says it depends on whether a company wants to fundamentally change itself when recruiting from outside. If consistency is more important, then you should promote from within.

Parry says that with more and more chief executives being parachuted in – with average stays of between three and four years – the danger is that they stay focused on share price and the bottom line rather than long-term strategic investment.

Kakabadse agrees: “Parachuting in CEOs doesn’t help. The most successful organisations are the ones that have grown their own talent.

A fresh CEO doesn’t understand what’s under the bonnet, or in the heart of the machine.

“The bedding-in time for a new chief executive is between 18 months and three years. But decisions are felt to be needed to be made quickly, so an incoming CEO invariably looks at costcutting without understanding hidden talent.”

Cue an exit of some of the ablest employees shortly afterwards.

Jill Ader, partner at leadership consultancy Egon Zehnder, says that although UK companies want to promote from within, sometimes that is not possible. All too often, companies do not leave themselves enough time to groom a replacement CEO.

STRATEGIC INITIATIVES Parachuting in CEOs doesn’t help.

A fresh CEO doesn’t understand what’s under the bonnet, or in the heart of the machine Left: Professor Andrew Kakabadse believes firms would benefit by promoting more from within; right: Christopher Bailey (right), previously creative chief of Burberry, has taken over as CEO from Angela Ahrendts (left)

Egon Zehnder tells boards that they need to prepare internal candidates for promotion three or four years in advance, rather than blindsiding them a month beforehand.

Often the perfect would-be CEO, unaware of the board’s intentions, leaves for another company. Or the

board assumes that an internal candidate wants the job, only for it to be cold-shouldered. Ader says: “Boards are responsible for succession planning.

All too often they hand this over to an already overstretched CEO.” Parry sees Christopher Bailey taking over from Angela Ahrendts as chief executive of Burberry as a perfect example of an internal promotion.

Bailey, who transformed Burberry

from a slightly downmarket brand into a super-luxury fashion house, took over from Ahrendts as CEO because Burberry had successfully reinvented itself – it was now more of a matter of staying on course.

Parry says: “It made perfect sense for Bailey to become CEO because he completely turned the business around.

He understands the business.”

Strategy execution

11

HSBC and Caterpillar are two more companies that have grown talent from within.

Tesco, on the other hand, has recruited its new chief executive Dave Lewis from Unilever because of the pounding it has taken from discount supermarkets Aldi and Lidl. Parry says: “It remains to be seen if either strategy is successful.”

There is also a trend towards increasingly younger chief executives.

In America 40 per cent of CEOs are aged between 60 and 90. In Britain that figure is just 14 per cent. Again, Kakabadse warns that British companies are losing out on valuable strategic experience in the boardroom.

Partly this is because the brain changes as you get older. Younger chief executives are much better at implementing detailed organisational strategy – after the age of 45 the brain gets muzzier about detail. However, past the age of 60 another type of thinking evolves, what Kakabadse calls “crystallised cognition” – the ability to solve complex and nuanced s t r a t e g i c p r o b l e m s s i m p l y.

Interestingly, this type of thinking peaks at the age of 85. By insisting on younger chief executives, companies are missing a trick, Kakabadse maintains.

A survey Kakabadse conducted in August for his new book The Success Formula found that the most successful companies had older people on the board. However, this was less than 20 per cent of the total surveyed.

He cites the examples of News Corporation chairman Rupert Murdoch, aged 83, and AngloAmerican chairman Sir John Parker, 72, as two older executives still in charge. “Most of the problems in big companies are thorny ‘crystallised cognition’ problems as opposed to operational difficulties,” says Kakabadse. “We’re going to find ourselves with problems because of a lack of supple and complex thinking in the boardroom.”

Egon Zehder, which has 69 offices worldwide, also wants to see more women chief executives running companies. It is campaigning to have women run a quarter of FTSE100 companies by 2025.

Ader says: “But for us diversity is not just about gender. It’s also about age. A board needs to have a mix of people who understand what millennials want as well as older ‘greybeards’ who have seen it all before.”

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The big interview Kenny Jacobs

Ryanair: A little more Mr Nice Guy Tim Adler

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FR IEND of mine became so exasperated with Ryanair’s strict baggage allowance that she would pile on jumpers and coats and would waddle through airport security – anything to avoid paying the airline’s punitive bag charges.

Others have boycotted Ryanair completely, fed up with its rude check-in staff and unhelpful cabin crew. Its website seemed designed to trap the unwary into paying for extras they did not need. Eventually even Michael O’Leary, the showman chief executive, acknowledged it was no longer good business to “deliberately piss people off”.

Last year, Ryanair issued not just one but two profit warnings – the first such warnings in over a decade. Ryanair admitted that its “abrupt culture” had become a problem. Ryanair’s focus on cost cutting, which had been applied with zealous passion, had to change. Its new strategy would be to attract premium passengers from low-cost rivals such as EasyJet, Vueling and Norwegian.

Ryanair’s board acknowledged that the airline had to change – the question was how? Enter Kenny Jacobs, Ryanair’s chief marketing officer, hired in December 2013 to change public perception about the low-cost carrier. Jacobs had spent five years as CMO of Moneysupermarket. com and many years at Tesco before that. Jacobs says: “I’ve been through a couple of companies that went through change. Each had a bucket list of what they wanted to do.”

He smiles ruefully when I tell him my various tales of woe. “The business had reached the point where it need to change and needed to do things

differently. It was time for change. And customer experience was one of the things most wrong.

Boarding Ryanair aircraft was infamous, creating a fractious contact point between customers and staff.”

Jacobs, 41, has flown in to London from one of his weekly whistlestop tours of Ryanair destinations. Each week he visits at least four Ryanair airports, and so far has racked up 107 flights on Europe’s biggest airline. He remains energetic despite this punishing travel schedule.

Jacobs, who has become the public face of Ryanair, instituted a change management programme called Always Getting Better. The programme had five planks: fixing things that customers disliked, improving the travel experience, appealing more to business travellers and families, going back onto the centralised booking system used by travel agents, and improving the online experience.

Scrapping the word “passenger” was one of the first things that Jacobs changed. The word “passenger” implies cattle being driven through check-in to boarding. He prefers the word “customer” because that implies an ongoing relationship that lasts beyond the airport terminal.

According to Jacobs, around 40 per cent of Ryanair customers are now repeat buyers.

“Michael O’Leary uses the word ‘customer’ now, not ‘passenger’,” Jacobs says.

Key to changing public perception about the brand was overhauling its clunky website. Jacobs has called the old site “rubbish” – it didn’t work on mobile and barely worked on tablet. The new site runs smoothly and has got rid of those irritating ha-has where you unwittingly bought travel insurance. Jacobs says: “The old website

Video special WATCH Kenny Jacobs talks to Tim Adler about the future of Ryanair http://business-reporter.co.uk

wasn’t built for customers. Ryanair had missed out on a couple of generations digitally. The website has changed completely and we will continue to improve it.”

Before Jacobs’ arrival, Ryanair also knew little about its customers. Ryanair was not alone in this – airlines have little information about who flies on them. This was an anathema to Jacobs, who was used to the massive amounts of information Tesco has about its customers. Indeed, Tesco owns Dunnhumby, a data company that crunches massive amounts of information about what you buy and where. He says: “Working at Tesco with Clubcard loyalty scheme, we knew everything about our customers. Airlines don’t do that. We’re now converting that data into a big asset for the company.”

Ryanair plans to start making personalising offers, differentiating between its customers.

The company has established what it calls Ryanair Lab, combining digital marketing, technology and data teams at its headquarters in Dublin. Ryanair has been on a massive recruitment drive for developers and data scientists since, with plans to triple the size of the data team in the next few years to around 100 employees.

Once its new strategy was clear, the airline announced that it would offer allocated seating on its planes – ending the unseemly rush by passengers to secure the best seats – relax cabin bag restrictions, reduce charges and loosen booking restrictions.

Jacobs says: “The brand has moved on dramatically. We’ve done a really good job.”

And this new softer, friendlier approach appears to be paying off. According to the YouGov BrandIndex, brand sentiment towards Ryanair has improved by 27 per cent in Britain since the changes. In August a record 9.4 million flew on

Kenny Jacobs has been tasked with repairing Ryanair’s cowboy image, although he maintains the carrier remains “the Aldi of the air”

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“The business had reached the point where it was time for change. And customer experience was one of the things most wrong. Boarding Ryanair aircraft was infamous, creating a fractious contact point between customers and staff” – Kenny Jacobs

Strategy execution

13

Manage risks too tightly and you’ll miss the chance to reform your business René Carayol

Portraits of Kenny Jacobs at the Charlotte Street Hotel, London, by Andras Rac

Ryanair with planes at 94 per cent capacity, and this year 87 million people will fly Ryanair compared with 82 million in 2014.

Buoyed by this, the carrier has announced big plans. Ryanair hopes to more than double passenger numbers in the next 10 years after agreeing a deal to buy up to 200 new Boeing aircraft. O’Leary says the bigger fleet will allow Ryanair to increase passenger numbers to more than 150 million by 2024. It is even talking about offering transatlantic flights to America for as little as €99 (£78) per person.

Right now though, the focus remains fixed on Europe. Ryanair is concentrating on Germany, Italy, Scandinavia and the UK as areas for growth. Says Jacobs: “America is not a priority right now. We could double our size just staying within Europe.”

With helpful staff, extra legroom and a liveand-let-live baggage policy, Ryanair is going after the more discerning customer who values the in-flight experience. That said, Jacobs thinks that some customers will miss the old buccaneering attitude.

“One of the reasons I joined the brand was because of that Robin Hood spirit. We’re still the Aldi of the air. There’s an element of authenticity that people still appreciate,” he grins.

So, what next for Jacobs as Ryanair moves on to the second phase of its new, less couldn’t-careless strategy? Ryanair is improving its plane interiors – most Ryanair planes have all the warmth of an East European motorway coach – with extra legroom and an improved colour scheme. Jacobs waxes lyrical about possibilities for Rya na i r-bra nded i n-f l ight fa m i ly entertainment.

Most importantly, Ryanair is embarking on a cabin crew training programme. He grimaces when I tell him that Ryanair cabin crew have complained to me mid-flight about how badly the company mistreats them.

But won’t a new disruptive airline come along as Ryanair climbs upmarket? (Business flyers accounted for 20 per cent of rival EasyJet’s passenger numbers last year.) Jacobs, who looks uncannily like Hollywood movie star Ed Harris, levels at me. “That’s just not going to happen,” he says, shaking his head.

The average cost of a Ryanair flight was €46 this year, he claims, compared with €83 for EasyJet and €242 for British Airways.

Nevertheless, Ryanair’s biggest challenge will be to find the balancing point between always getting better and keeping costs down.

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HERE IS hardly an organisation today that isn’t contemplating or executing some form of digital strategy. However, recent experience is beginning to inform us that we have to hold our breath and perhaps digitise the whole organisation in one go. Piecemeal or incremental approaches are beginning to unravel, as much for cultural reasons as anything else. This new digitised world and the old analogue world are increasingly uncomfortable bedfellows.

Many years ago, at the beginning of my career, I joined the newly formed IT department at Marks & Spencer. Up until then, M&S had outsourced all its computing requirements. By bringing everything in-house, with the straightforward strategy of “automating existing manual processes”, it gained so much more, as it had much deeper, unforeseen, and positive implications.

The simple act of automation had three clear by-products: speed, accuracy and reduced cost. These were more than compelling enough to continue, however, the real (but largely unseen) prize was the transformation of the business. M&S had many secretaries typing up handwritten notes, sitting in typing pools on every floor. Within a couple of years they had gone forever with the advent of the word processor.

Now everyone does their own typing and so much more.

When Mike Harris famously presented his pioneering initiative of “a bank without branches”, many laughed.

His initial idea was 24/7 telephone banking, and because the strategy was executed as a start-up despite being a wholly owned subsidiary of HSBC (Midland Bank at the time), it found a route to eventually become the 24/7 online banking solution that is First Direct today.

So digital strategies are much more about digitising the whole organisation.

It’s not about an online site, or standalone social media, or, most dangerous of all, bolting on a digitised manual process.There is not a business operating today that would not want the

following benefits – reduced cost base, removal of manual intervention, removal of silos, increased collaboration, enhanced compliance and governance, centres of excellence, customer centricity, speed and much more. All these are by-products of holistically digitising the organisation.

Most firms have approached the digital world cautiously, in a tightly risk-managed and incremental fashion.

This approach can lead to huge cultural conflict, as the young and fast-moving digital teams face the resistance of those being replaced or removed. As residual power and authority tends to lie with the existing structures, this can be an inadvertent recipe for failure, and a barrier to wholesale transformation.

The hardest strategy to execute is a transformational and fundamental change of a still successful business, but it really is not worth waiting until the business fails, or falls far behind its rivals before attempting to digitise it.

When Mike Harris and his team were designing what was to become First Direct, they were not constrained by the existing model for banks. They started with the customer, which led them to the need for a new style of banking with no need for physical bank branches.

We need to be bold enough to potentially envisage what our business would look like if it was totally digitised, without narrowing our thinking by the current method of working. Mpesa, the much-quoted mobile money transfer system which originated in Kenya, is now all the rage across East Africa.

Mpesa came about because most Kenyans didn’t have bank accounts, yet needed to transfer money safely and quickly. This successful and groundbreaking mobile solution for payments has shown the developed world a clean pair of heels for well over a decade now.

Our inherent desire to tightly manage the risks associated with significant change can force us down the route of careful and painstaking incremental development, and thereby missing the opportunity to really rejuvenate the business.

FERGIE TIME

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IndustryVIEW

Can the techniques of the most successful football manager in recent history be applied to business? Tim Adler talks to Damian Hughes about his new book How To Think Like Sir Alex Ferguson

Good project governance – a strategy for success

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here was a time when many in the higher echelons of the corporate world saw project management as a way of running individual schemes, best left to project managers to get on with while the board concentrated on running the organisation.

Times have changed. Today the perceived wisdom is that project management is integral to driving organisations forward and ensuring they operate more effectively and efficiently. It is accepted as so important that many boards now include a director with responsibility for this essential element.

So just as good corporate governance is necessary to conduct and run the business competently and with integrity, it makes total sense to do the same with projects as part and parcel of the overall strategy.

A leading authority on the subject is the Association for Project Management (APM), the largest professional body of its kind in Europe. In its highly regarded

publication Directing Change: A Guide To Governance Of Project Management, now in its second edition, APM identifies four main components: • • • •

Portfolio direction Project sponsorship Project management capability Disclosure and reporting

The guide states: “Effective governance of project management ensures that an organisation’s project portfolio is aligned to business objectives, is delivered efficiently and is sustainable.”

Simply put, governance of project management is about doing the right projects, not necessarily doing all projects right. Consider the potential results of projects that fail or should never have been started and its value is clear. Its very nature also supports the way that the board and other major stakeholders exchange timely, relevant and reliable information.

The approach to delivering the London 2012 Olympic Games showed governance of project management in action. With project management rigour at the heart of the strategy, it demonstrated how focusing at the outset on the details designed to test the suitability of people, processes and structures led to success at every level.

There are no hard and fast rules to governance of project management, but there is definitely best practice.

The guide from APM is aimed at those at board level and identifies 13 principles which, when applied, could help to avoid common causes of project failure and the subsequent consequences on an organisation’s bottom line, reputation and market confidence.

Directing Change is available to buy from apm.org.uk/ publications

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T

HE AVERAGE job expectancy of a football manager in Britain is just one year and four months before they are sacked.

Before he retired in May 2013, Manchester United manager Sir Alex Ferguson outlasted 13 different Manchester City managers.

He also won 13 Premier League titles, two European Cups, five FA Cups, one European Cup Winners’ Cup and two League Cups.

So what was it about Alex Ferguson that gave him his longevity – and what management lessons can executives learn? This was what management consultant Professor Damian Hughes set out to distil in his new book How To Think Like Sir Alex Ferguson. Although Ferguson has spoken at length in his memoirs about what he did, there was little detail on the how or why, says Hughes.

Edgar Schein, former professor at MIT Sloan School of Management, has identified leadership behaviour as one of the most important things shaping corporate culture. Clearly, Harvard Business School rated Ferguson – a foreign manager of what the Americans still perceive as an obscure game called soccer – enough to invite him to lecture last autumn.

For Hughes, the biggest lesson Ferguson has to teach other chief executives is the ability to cope with change. Crucially, Ferguson did not see himself as a football manager but as a manager of change – good advice for any chief executive overseeing the strategic direction of a company.

This change management is the central plank of Ferguson’s management approach. Ferguson said the cycle of a successful team lasts for around four years before change is needed. He would visualise where he wanted the team to be in three or four years and adjust accordingly. The Scotsman always had his eye fixed ahead rather than on any short-term goals such as winning trophies.

Hughes says: “What comes through is his relentless focus – not on winning for winning’s sake, but on something bigger than that, almost an idea of Manchester United.”

Ferguson himself has said that a lack of focus drains energy, which is so vital. “Someone needs to be in control of that. Someone has to be in control of that.” He told tennis player and fellow Scot Andy Murray: “If you can focus for the entire

match, the consistency will follow.” Key to the Ferguson management method was identifying talent and creating the right team. This was not about hiring the best players. Indeed, says Hughes, you could argue that United have never had the best players. Rather, it was ensuring the squad had the right bulldog spirit.

A case in point is Danny Welbeck, the England striker who joined Arsenal from United in the summer. According to Hughes, Welbeck was never the most talented player – there were plenty of footballers out there just as talented – but he had the right attitude. Ferguson spotted that Welbeck would stay behind and help coaches collect stray balls after training sessions.

Another trick was to watch videos with players asking them to analyse their mistakes. Footballers such as David Beckham weren’t defensive about what they had got wrong. They were willing to learn rather than justify themselves. Others just got defensive.

Ferguson was also unafraid to seek advice from others. A recent study, which compared 41 Nobel laureates in the sciences with a sample of their similarly experienced peers, found that a major difference between the two groups was that the Nobel laureates were open to a variety of opinions.

Ferg uson cont inuously

Above: Sir Alex celebrates his final Premier League title with Manchester United before retiring in 2013; below: Damian Hughes; inset: David Beckham, sporting the war wound he received from a flying football boot

Five tips from Fergie on how to become a more effective boss

Play to your strengths Ferguson understood his strengths, and described himself as a risk taker.

“If we are down, I am ready to take more risks,” he once said. “I was perfectly happy to lose if it meant

15

Sparking the flame of creative talent

How to be a champion manager Recruit for character When Walt Disney recruited executives, he would watch whether a candidate put salt onto their food before tasting it. He viewed this action as a sign of inflexible thinking; after all, if a person was not prepared to at least taste a meal before adding something, this behaviour would transfer to the workplace. Ferguson used a similar device. He would show young players their worst performance and ask, “Tell me about this game?” What he was looking for was those who learned from experience rather than those who got defensive.

Strategy execution

we’d give ourselves a good chance to win.”

tough, so we don’t panic but instead know what it takes to be successful.”

Enjoy the ride Ferguson would pride himself on his ability to make players and staff laugh.

“It served an important role. The players realised they could relax in the company of the boss,” said youth team coach Eric Harrison.

Build cathedrals Ferguson enjoyed telling a story of three men laying bricks. Each was asked what he was doing. “Laying bricks,” answered the first. “Earning £10 per hour,” replied the second. The third said: “I’m building a cathedral and one day I’ll bring my kids back here and tell them that their dad contributed to this magnificent building.” Ferguson suggested to his players that they could apply this third approach while training – “I’m helping to build the best Manchester United team ever and I’ll be proud to tell my grandchildren I was part of it.” When David Beckham then scored a goal, he ran off in celebration shouting, ‘Cathedral 1, Bricklayers 0.”

Prepare for squeaky bum time “United never get beaten,” believed Ferguson. “We may occasionally run out of time but we never believe we can be beaten.”

This mantra was reinforced through his training sessions: players practised how they should play if a goal was required with five minutes remaining. “We practise for when the going gets

refreshed the people around him, making sure he was up to date with the latest thinking.

One of the phrases most associated with Ferguson is “squeaky bum time” – tense moments when Manchester United came under pressure as the minutes ticked away. Ferguson rigorously practised for when things weren’t going so well, especially in the closing moments of a game. He described this characteristic in his Harvard interviews on what he considers the requirements of a great leader. “I am a gambler – a risk-taker – and you can see that in how we played in the late stages of matches.”

Indeed, Ferguson’s appetite for risk would increase as the stakes were raised. However, alongside his brilliance as a manager, Ferguson also gained a reputation for bullying, regularly humiliating players and journalists alike with what came to be known as the “hairdryer” treatment. Hughes says: “One of the things I was keen to shatter was the perception that Ferguson was a bully. What he was ruthless about was maintaining standards. Players never thought that he was criticising them personally as opposed to their behaviour.”

Rather, says Hughes, he made sure his interventions were short, sharp and mostly positive. He once said that “well done” are the two most beautiful words in the English language.

Try telling that to David Beckham, who, back in 2003, was hit on the forehead by a football boot that had been kicked by a furious Fergie.

What Ferguson was angry about, explains Hughes, was Beckham’s increasingly diva-ish behaviour, playing for himself rather than the team. Ferguson’s frustration came from what he saw as Beckham having his head turned by the fashion and pop star world of his wife Victoria.

Hughes argues Beckham never fulfilled his potential as a player. For Ferguson, there were three levels of loyalty: to oneself, to the number on the back of the shirt, and finally to Manchester United. Beckham had become selfish.

Ferguson’s tremendous belief in the possibility of Manchester United infected his team. He once said: “Manchester United never get beaten. We may occasionally run out of time but we never believe we can be beaten.”

Always looking ahead has stayed with Ferguson since he stepped down as manager.

He has talked about retirement being a new beginning rather than the end. His dad was dead within a year of putting on his slippers, Ferguson has reflected. “Ferguson is probably applying some of his strategies to himself as he copes with retirement,” says Hughes.

KARMARAMA, a digital agency whose clients include the BBC and Costa Coffee, sees its role as helping its creative staff reach their full potential.

The London-based agency employs around 40 creative staff to work on campaigns. But unlike most agencies that brandish awards as a way of getting work, Karmarama makes a point of not entering competitions.

“Self-actualisation” is what Karmarama MD James Denton-Clark calls helping creatives achieve their full potential. Denton-Clark refers to what psychologist Abraham Maslow called a “hierarchy of needs” that had achieving creative fulfilment at the top.

Denton-Clark says: “As the market has moved on, we have to find new ways to incentivise people. Incentivising creative people is increasingly difficult.

All the old corporate structures don’t apply because they seek creative satisfaction by other means.”

What film producer Jeremy Thomas, whose new film High Rise comes out next year, sells to his 40 staff is a purity of vision. His Recorded Picture Company is unusual in that it is uninterested in television or online. Film is the most “desired” of all creative businesses, says Thomas. The Oscar-winning producer incentivises staff with cash bonuses if a film does well.

Merlin Entertainments, the theme park and attractions operator whose sites include Legoland and Madame Tussauds, has established what it calls boot camps for management, finance, human resources and marketing to spot and develop talent. Tea Colaianni, group HR director, says that her company’s flat management structure defangs timewasting political struggles. “Political companies make it hard to get things done. Politics can suck the creative energy out of a company,” says Colaianni.

“We don’t have the bureaucratic layers that other companies have.”

Business Reporter · November 2014

Strategy execution

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Planning ahead for successful post merger integration

I

mproving economic growth and, in turn, M&A prospects has driven many businesses to consider whether they would serve their stakeholders better through disposing of non-core businesses. A recent example being the Co-operative Group’s disposals of its pharmacy, farms and cash-intransit businesses.

Here are some of the key factors in separation and post-merger integration (PMI) success: 1. Target operating model Defining the structure of the future business as early as possible helps identify synergies and define the business case for the investment/ divestment. There are a number of trade-offs: (a) Logistical footprint: Rationalising depots, branches and offices can reduce fixed costs, but can increase variable (eg “stem time” in vehicles driving to and from depots) and one-off costs (eg relocation); (b) Shared services: Concentrating all back-office functions can achieve economies of scale and process efficiencies; however it can lead to loss of knowledge; (c) Offshoring: The arbitrage is continually narrowing – that is, employees in lower-cost economies are upskilling, but wage inflation is eroding the cost differential, making the potential savings from offshoring more difficult to assess.

2. Synergy quantification The investment case should be realistic; a stretch case should be communicated when the PMI begins.

3. Transitional services agreement This must provide the necessary services for a conservative period until separation.

The skill comes in negotiating flexibility in terms of service provision and price.

4. Completion actions checklist A checklist of legal, financial, tax and operational actions helps ensure a smooth transition through to day one.

5. Measuring success Tracking both financial and operational measures is key to measuring return on investment. PE firms are fastidious in monitoring their deal teams’ track records; for corporates, it’s more difficult and they often don’t have a clear view how successful their managers are at investing.

Delivering a successful separation and PMI is complex, but giving consideration to the above factors and moving as much of the decision-making pre-deal can lay the foundations for maximising value enhancement post day one.

Michael Knott (left) is senior managing director, FTI +44 (0)20 3727 1297 michael.knott@ fticonsulting.com

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Don’t get tangled in your supply chain…

By Tim Adler BUSINESSES should never underestimate the complexity of supply chains when it comes to strategy execution, say experts.

Supply chain management is becoming increasingly important as every business becomes an e-commerce enterprise. This kind of logistics covers purchasing, packaging, shipping, warehousing and customer delivery.

“Careful supply chain m a n a ge me nt h a s b e e n instrumental in conception and growth of our business,” says Julien Callede, co-founder and chief operating officer of furniture supplier Made.com.

“The bigger you grow the more complex the supply chain becomes. And the bigger you become, the bigger the impact on customers the smallest mistake becomes.”

Made.com launched in 2010, supplying furniture direct from independent designers to the customer. Gathering orders prior to production with a factory minimum of 50 units was key to its strategy. Its plan was to disrupt the giant furniture retailing businesses such as Ikea and Habitat. Revenue has grown by an average 120 per cent year-onyear since then.

Because three quarters of Made.com’s furniture is imported into Britain, getting the supply

chain right and building in expansion plans was crucial.

Callede says: “If I have one piece of advice, it’s never to make shortcuts when it comes to supply chain or information technology.

Always think where your company might be in two to five years’ time when your business has grown to 10 times its size.”

The suppliers you work with now may not be the same suppliers you work with in the future, he says. To avoid having to change suppliers mid-flow, Callede says that it is key to “partner with your partners”.

“There’s no such thing as a perfect partner – you need to

help them do the job so they can provide what you need.”

Ocado is another e-commerce business where supply chain is everything. Founded in 2000, it is the world’s largest online supermarket, sourcing mainly through its rolling deal with Waitrose and Carrefour and delivering 180,000 orders per week. “In the e-commerce world pressure on supply chain is much greater,” says Ocado director of operations Mark Richardson.

“Supply chain management is embedded into Ocado because that’s what the company is about.

And supply chain sets strategy to an enormous degree because

Tesco pressure highlights role of non-executive directors SHAREHOLDER pressure for Tesco CEO Dave Lewis to give up his part-time role at BSkyB has highlighted the role of the non-executive director.

Tesco shareholders are unhappy about Lewis spending up to eight days a year sitting on BSkyB’s board when he should be sorting out their own problems, they say.

Non-executive directors help formulate corporate strategy, but it is down to management to implement it.

“Executives should never embark on a

non-executive commitment if they cannot commit to the time involvement required,” says Andy Kemp, chairman of the non-executive director programme at PriceWaterhouseCoopers. “It’s important to make sure that you have time to fulfil the role.”

How much input a non-executive director has on company strategy depends on the chief executive.

Sir Terry Leahy, a former boss at Tesco, made it quite clear to his nonexecs that he decided company strategy

it’s where our costs are.”

Increasing the speed of and shortening supply chains is ever more important as the pressure to keep inventory down and reduce waste intensifies.

Richardson says: “A couple of decades ago supply chain management was all about taking costs out of the system.

Today it’s about speed of delivery and the level of customer service.

You want it fast and you want it accurate.”

Ocado’s supply chain is different to most e-commerce sites because it does not supply shops, shortening the chain between customer and supplier.

The logistics operation moves orders into Ocado’s t wo distribution centres – based in Hatfield, Hertfordshire and Tamworth, Staffordshire – and from there to the customer’s home.

Richardson says: “Everybody is trying to shorten the supply chain. Speeding up the chain is the problem everybody faces.

“Companies want to reduce the amount of stock they hold so they have to rely less on their forecast in favour of orders already taken. Everybody wants to have replenishment inventory more readily available.”

Ocado makes an effort to get its supply chain as accurate as possible so there is little wastage, says Richardson. The online supermarket claims that it has a wastage rate of just 0.8 per cent – a lot less than other retailers.

– whereas others take a more collaborative approach.

Kemp says: “There are two roles for the non-executive director has when it comes to strategy. First, they help to crystallise and then implement strategy.

But non-executives don’t formulate strategy – that’s done by the executive team, who come up with options.”

Kemp says that corporate strategy has become increasingly important as the rate of change facing organisations has speeded up.

Kemp says: “The market tends to focus on short-term delivery. As a result, the non-executive director needs to ensure that the board stays focused on the medium to long-term priorities.”

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Strategy execution

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17

IndustryVIEW

Halve your journey time: Outsource without losing control Acora, a growing international IT services provider with a breadth of knowledge and expertise in outsourced IT services, is fast establishing itself as one of the leading outsourced service providers for the UK mid-market, with more than £30 million of multi-year contracts under management. Here, its CEO David Rabson (left) talks about the reasons behind its success.

T

he decision to use outsourcing to improve accountability, reliability and scalability is becoming a strategic boardroom issue. As David Rabson explains: “Businesses want to get to their destination quicker. They are looking at outsourcing areas that are not necessarily core to the business, but they recognise them as still being critical ingredients to its success.”

When a company outsources, it drives capacity into other areas of its business, giving people the space to focus on innovation and competitive advantage.

It also helps improve its accountability for performance, with greater expectations being placed on the outsourcing provider than would be in its own internal team.

“One of the biggest balances from a boardroom perspective is being able to outsource without losing control,” says Rabson (inset). “If you are working with the right service provider, they should actually be keeping you better informed and give you more control.”

Rabson goes on to say: “The decision to outsource can halve your journey time.”

For businesses planning or undergoing

rapid changes, outsourcing improves the speed (and often quality) of execution.

“We see complex transformational projects that might take 18 months to two years with a solely internal team taking nine months to a year having outsourced.”

But Rabson warns outsourcing is not the silver bullet to something that may be underinvested and poorly operated to start with – it does not right all of those wrongs. A company might need to go through a stage of transition and transformation with the service provider to achieve the full potential of outsourcing.

Another important point to consider when choosing an outsourcer is the cultural fit between the client business and their other service providers.

“That can sometimes be missed by the larger outsource providers servicing mid-sized organisations,” adds Rabson.

“They have one set of rigid processes that they adhere to, which do not necessarily always work in smaller, more dynamic businesses.”

0844 264 2222 www.acora.com

An evolving landscape: Paperless communication for leadership teams

S

enior executives know that keeping the board informed is a crucial job in any organisation.

Until recently this has meant generating an enormous amount of printed material and heavy use of unsecure emails. Now, with the coming of the iPad and other tablets, there has been a major shift to electronic working. The iPad is the popular choice as it combines the ease of use of paper with the immediacy of online access.

Going into 2015 and beyond we see that the communication needs of leadership teams will move far beyond those that email and paper can support; these requirements apply to all forms of organisations, including not-for-profit, national and local government. Many will favour a BYOD approach to keep costs to a minimum and allow participants to use the device of their choice.

Today’s mobile executives need to share documents confidentially, conduct secure meetings, drive initiatives, and make decisions on the go, often in between meetings. Without a secure collaboration platform designed for the devices they like to take everywhere, leadership work can grind to a halt. The platform needs an architecture designed for leadership teams whose collaboration is often informal, fluid, and mobile.

Crucial elements of the architecture include: An executive experience: Leadership teams always work under deadline pressures and expect to have

the information they need at their fingertips.

On tablets, this means taking maximum advantage of graphics and animation and creating a seamless online/offline experience that gives executives ready access to materials even when they are out of Wi-Fi range.

Security: Information security is an obvious concern in a BYOD environment where devices can be lost. There is a tension between mobility and information security, particularly with downloaded materials. For any device it is essential that all offline content is stored in a secure, encrypted local container with automatic synchronisation to apply changes made to the online copy. All offline content remains under central administrative control with purge/delete options including for lost or stolen devices.

Controlled distribution: With critical decisions on the line every day, relying on consumer tools for file sharing can create problems. The platform should control every aspect of the collaboration chain while providing ready access to updated content without the worry of information leaks. This applies to content, communications and workflow.

Content segregation: The platform architecture should support segregating content by groups and teams within team spaces; these then function as a focal point for particular initiatives. Executives only have access to the content for which they are authorised, thereby reducing the risk of sharing outside the team. At the same time, the platform should allow for switching back and forth between the team spaces without the burden of additional passwords or needing to login for every switch.

A platform for growth: As the use of mobile devices among executives has grown, so has the dispersion of leadership teams. Today these teams are common across large enterprises in all industries and smaller, fast-moving organisations.

Mobility is a force that lends a competitive edge to all – having the right platform for the board saves time, reduces costs and creates efficiencies when the need to expand its use to other teams becomes apparent.

BoardVantage leads the market in delivering paperless process for board and leadership communication.

Trusted by enterprises in more than 50 countries, including half of the Fortune 500, BoardVantage sets the bar for a mobile executive experience. www.boardvantage.com/uk

Business Reporter · November 2014

Healthcare innovation

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How location data is helping save lives B ack in 1853, London physician John Snow was determined to find out what had caused an outbreak of cholera in London’s Soho.

Using one of the earliest Ordnance Survey maps, he mapped where cholera victims were living. Snow traced the outbreak to an infected water well.

Today, OS data is still being used by health services to plot the most efficient use of resources: where to build new hospitals and GP surgeries, helping them make smarter and more informed decisions about where to locate services based on the needs of the community. More than 3,500 public sector organisations are using OS data to apply efficiency to decisions. Of these, 232 health services are using its data.

“Big data is changing the way healthcare works,” says Ordnance Survey’s commercial director Andrew Loveless. “OS is working with the Health and Social Care Information Centre (HSCIC) to explore how to link databases covering 1,600 hospitals, 10,500 GP surgeries, clinical patient data and demographic information with local health IT systems and all ambulance command and control systems.” In north Essex, Primary Care Trust has

used mapping analysis as an integral part of its planning process to secure £3.1million to increase the capacity of primary care services in areas of new development. OS data is helping to save lives while driving value-formoney efficiencies in the NHS. “Health managers need to think about visualising data rather than just having it in Excel spreadsheets,” adds Loveless. “The more health organisations think smarter about budgeting and servicing the needs of the community by thinking about data in a visual way, the more effective and efficient the health sector will become.”

So what do health managers need to do to help them make smarter, more informed decisions?

Ordnance Survey can help you, suggests Loveless. “It’s about getting data presented in a different way.

OS can help turn data into value.”

As an organisation, OS is about much more than data. Location has become crucial to planning and delivery and OS, and its partners, support a whole range of health solutions and services.

It’s not just about the public sector. Location-based decision making is increasingly being used in business. Insurance, commercial property and utilities are all using this approach, and those sectors depend on having accurate data to drive business decisions.

One of OS’s unique capabilities is that it can constantly update information. There are 250 surveyors and two aircraft capturing the minutiae of change – whether it’s where a roadside kerb or a railway line is.

Loveless adds: “Organisations are now recognising the importance of accurate location data and how this can add value and work alongside their own information.

A picture may say a thousand words, but a map says a million.”

023 8005 5447 www.ordnancesurvey.co.uk

H IN EA 18 N LT -19 O H VA C TI AR O E N

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REGENERATION GAME

A

A breakthrough in stem cell research has paved the way for incredible medical advances. Tim Adler reports

PA R A LYSED man walk ing again after a cell transplant has been described as the most impressive scientific breakthrough since the Moon landings.

Scientists in London have worked with surgeons in Poland to transplant cells from a paralysed man’s nasal cavity into his spinal cord.

Darek Fidyka (below), 38, who was paralysed from the chest down in a knife attack in 2010, can now walk using a frame. The stem cell breakthrough has given hope to millions of people disabled with spinal cord injuries.

The implications are immense – not just for those disabled by spinal cord injury – but also for those suffering from Parkinson’s disease, diabetes, osteoarthritis, strokes, blindness and even Alzheimer’s. Indeed, any condition that the body could possibly regenerate from.

“The possibilities are endless,” says Professor Brandon Noble, a director of the UK Stem Cell Foundation, a charity set up in 2007 to speed up progress of stem cell research. To date the charity has contributed £2.5million.

“It opens the doors to incredible clinical innovation. What we saw in Poland was a little bit of success, but then you can’t help start thinking about a completely disruptive technology.”

The opportunities are huge for the private sector. The worldwide stem cell therapy market is poised to grow at a CAGR of 39.5 per cent from 2015 to 2020, to reach $330million by 2020 says RnRMarketResearch.com.

And if stem cell healthcare takes off, there will be a whole range of spin-off businesses, from surgical instruments to operating theatre design. “It’s going to be fascinating when the doors are thrown open,” says Professor Noble.

So far, US companies have been quicker to embrace stem cell research than their UK counterparts.

Pfizer and Johnson & Johnson have been

working on stem cell research. More than 100 companies belong to the Washington DC-based Alliance of Regenerative Medicine. UK big pharma has refrained from getting involved, preferring a wait-and-see approach. Smaller UK biotech companies have made the running so far.

Noble wonders if large British companies might get left behind: “Smaller start-ups have been taking the risk, but if this pays off they will have an absolute monster of an industry because it’s going to be entirely disruptive.”

That said, the biotech landscape is littered with start-ups that failed. “I suspect that big pharma’s strategy is to leverage on what smaller start-ups are doing,” says Bob Palay, chairman & CEO of Madison, Wisconsin-based Cellular Dynamics International.

Cellular Dynamics manufactures human cells for use on testing patient reactions to medicines. The company was founded by James Thomson, the first scientist to artificially create stem cells.

Palay says: “Our work is helping make safer, better medicine. If you think about medicine we have very few things that help repair damage.”

But Noble says that one patient using his own stem cells to regenerate a spinal cord is a very different – and individual – proposition to the mass cultivation of stem cells to create a global panacea. A simpler technology might be artificially created peripheral nerve strips that act as a plank for those cells to bond across.

“There’s a whole raft of interesting technologies that might be used to place cells which is emerging and more clear-cut as a business proposition.”

Palay says the next step will be to use ar tif icially created cells in operations. There are some procedures where it is impossible to use cells taken from elsewhere in the body.

“We’re at the beginning of a new approach to medicine.

This is an exciting time. Come and join us,” says Palay.

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Healthcare innovation

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Inspector Dogberry

GlaxoSmithKline is looking to float the HIV business it set up five years ago in a move that would create a listed company bigger than Marks & Spencer and Sainsbury’s combined.

GSK and its US rival Pfizer established ViiV Healthcare

By Matt Smith, web editor

and the Victor Chang Cardiac

in 2009, combining their

ClearPoint Strategy

Research Institute was key to the

HIV research efforts.

taken from brain-dead patients

breakthrough. Kumud Dhital, a

Japanese drug maker

www.clearpointstrategy.com/ category/strategy-execution

while the organ was still beating.

surgeon at St Vincent’s, said he

Shinogi, already a research

But the St Vincent’s Hospital

“kicked the air” when the first

partner, also bought a stake.

A breakthrough by Australian

team has performed three

operation was successful.

surgeons at a hospital in Sydney

transplants with donor hearts

could save the lives of one third

that stopped for 20 minutes. The

world,” he said. “We know that

to £15billion, says chief

more heart transplant patients.

first patient has been at home for

the heart, like other organs, can

executive Sir Andrew Witty.

Surgeons have successfully

two months and feels well, the

be reanimated, restarted, and

GS K – which owns nearly

transplanted “dead” hearts into

second was released a fortnight

only now have we been able to do

80 per cent of the joint

patients for the first time – a

ago, while the third is in intensive

it where a heart that has stopped

venture – plans to float

groundbreaking procedure with

care but has no major problems.

can be retrieved by the transplant

a “minority” stake.

Until now heart transplants had to be

the potential to significantly boost the supply of donor organs.

“They are the only three in the

A preservation solution

Floating ViiV could value the company at up

How can you get your team as excited as you are about your next project? How can the use of statistics and data yield better results? And what is the best way to approach a strategy review meeting? Find the answers to these questions and more on the ClearPoint Strategy blog.

team, put on the machine, and

jointly developed by the hospital

The Glue

transplanted.”

www.strategyexecutionblog.com

The North American market for healthcare IT is forecast to grow at a compound annual growth rate of 7.4 per cent to reach $31.3 billion (£19.4 billion) by 2017, according to Research and Markets. Major factors driving the growth are increased pressure to cut healthcare costs, growing demand to integrate healthcare systems and the rise in ageing population.

However, the growth in healthcare IT is constrained by how expensive technology solutions are – high maintenance and service costs, interoperability issues and a shortage of IT professionals are particular issues.

“The impact of IT on healthcare in the past decade has been modest, despite the huge potential,” the report authors note.

IndustryVIEW

Twitter: @dogberryTweets

19

Time to take your medicine Taking your

the day or

medication at

night might

the right time of

therefore be critical

day might be crucial if it’s to

because the medicine may have

work, say scientists. A new study

only a limited time-span to overlap

suggests different drugs work

with the activity of a target organ,”

at different times on our body

Professor John Hogenesch told

clocks. Different parts of the body

The Independent.

This blog aims to “make strategy stick” with its posts on how to organise and execute projects. The site seems to be inactive, but there are plenty of posts with useful advice to browse through, including an article on how to get improved results by involving your CEO with performance excellence.

FundedByMe blog.fundedbyme.com The FundedByMe crowdfunding blog tracks projects both before and after they raise the money required to get off the ground, as well as offering advice on how to attract potential investors to your venture. Recent posts include highlights from a Stockholm pitch event and news on a clothing firm that has opened its first crowdfunded store.

The Crowdfunder Blog www.crowdfunder.co.uk/blog

become active at different times on a 24-hour biological clock.

The University of Pennsylvania study discovered that 56 of 100 top-selling drugs only work when organs and tissues are at their peak. For example, drugs targeting adrenal glands are best taken in the early morning. “Taking a drug at a particular time of

Project Planning Go (Free – Android, iOS)

Ensure your next strategy is executed smoothly with this business planning app, which enables you to keep track of timetables and tasks.

Kickstarter (Free – Android, iOS)

Browse and pledge via one of the world’s most famous crowdfunding platforms in the palm of your hand with Kickstarter’s free app.

Crowdfunder.co.uk is a platform that allows investors to back projects that appeal to them in exchange for special rewards.

The blog takes a look at some of the most interesting and successful ventures the site has seen, including the transformation of St Luke’s Church in Liverpool and several independent high street shops.

Boardroom innovation to spearhead a paperless NHS

J

eremy Hunt’s challenge to the NHS to be paperless by 2018 has led to a shift in thinking, with internal processes as well as patient records being digitised.

Achieving a paperless NHS takes real organisational change. It starts from the top: senior level internal processes and business structures can be enhanced and improved by a digital approach, moving away from long-held paper-based systems.

It just isn’t feasible to deliver public-facing services digitally, and still retain old systems internally.

Every NHS trust board meeting requires packs of information to be prepared,

distributed and reviewed in advance.

Traditionally, this has been a paper-heavy process, both time-consuming and costly, when the NHS is trying to reduce both budget and its carbon footprint.

In line with government digital strategy, innovation has come in the form of board portals: secure technology that enables the compilation and distribution of board-level information to NHS trustees, directors and senior management teams. A board portal can help improve governance and all senior-level communications across the organisation. It reduces staff and IT resources needed to prepare previously

paper-based board documentation and delivers significant savings in terms of paper, couriers and postage.

Diligent Boardbooks is the most widely used of these portals, working with more than 82,000 directors, leaders and administrators worldwide.

Aneurin Bevan University Health Board, a Diligent customer, says: “The main driver for going digital was cost and efficiency. Before using Diligent Boardbooks we used paper copies for our board packs but this involved a considerable amount of administration. We want to be seen as an organisation that embraces new technology to deliver an efficient service.”

Charlie Horrell is managing director, EMEA – Diligent Boardbooks Limited +44 20 7605 7400 www.boardbooks.com

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INSIDE TRACK

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IndustryVIEW

20 · Business Reporter · November 2014

Industry comes together at AltFi awards

B

Government-backed finance to start or grow a business

T

he marketplace for loans to small businesses has become increasingly inefficient.

According to research by Knowledge Peers earlier this year, funders struggle to find the right SMEs to fund, and SMEs struggle to find the right funding.

There is a significant untapped demand for businesses to invest, but many small business owners either do not have assets in the background or are understandably unwilling to offer them to banks to invest in their business as these are often personal assets such as their home.

Since the financial crisis, banks have become more risk-averse, as well as having become increasingly subject to new financial regulation. As a result, they are unable to offer services to many small businesses that often seek small-scale loans. They may also have a short track-record, poor credit history and few assets in the background to offer as security.

Community Development Finance Institutions (CDFIs) exist to help these

businesses start up or grow. In 2013 alone, CDFIs lent more than £52million, helping 9,303 small-to-medium enterprises to create 11,700 new jobs (CDFA, 2014).

GLE oneLondon is a leading CDFI which provides loans and supports businesses across the UK with free advice to unlock their economic potential and grow. In 2014 and 2015, GLE oneLondon has more than £15million of loan funding available for small businesses that are both starting up and growing. This year so far, GLE has lent more than £6million to SMEs, helping create or protect nearly 2,800 jobs. One of those businesses was Theatre Tots Ltd, based in Lewisham, referred to us after an unsuccessful application with its bank. Theatre Tots Ltd provides drama sessions, workshops and shows for small children.

GLE oneLondon provided £15,000 for the publishing of book apps, investment in merchandise and website development.

Laura James, managing director of Theatre Tots Ltd, says: “Discovering GLE

was a turning point in our business development. From the first phone call Emma [one of GLE’s finance specialists] was reassuring, professional and attentive. It was so refreshing after a long and frustrating experience with our bank. The application process is thorough and provided a brilliant opportunity to really look at your business position and the direction you are going in.

“Being a small business can be a lonely role, and it’s invaluable to have the time and professional input that GLE gave. The final-stage interview was again an invaluable experience.

It was structured in a way that was very useful, with lots of insightful questions being asked. I walked away thinking that, even if I didn’t get it, the whole process had been well worth the time investment. It’s not just about securing a loan, it’s about the advice and support along the way.”

Nicholas Nicolaou (left) is managing director, GLE oneLondon 0845 603 2820 www.glebusinessloans.co.uk www.glestartup.co.uk

ack on September 23, at a packed hall at Vinopolis on London’s South Bank, AltFi kicked off its first annual awards.

More than 150 guests were in attendance, with nearly all of the major platforms from the UK and Europe represented.

There were 15 different awards to hand out, which were distributed based largely upon the decisionmaking of just under two dozen independent judges – each of whom can claim to be a thought leader in the space. RateSetter grabbed four AltFi totems – including the coveted Alternative Finance Platform of the Year UK award. Zopa scooped the Editor’s Choice Award – which is the one category in which the AltFi team had the deciding say.

Rhydian Lewis, founder and CEO of RateSetter, was delighted to take home the Alternative Finance Platform of the Year award, saying: “We are absolutely thrilled, it matters to us because it shows that consumers come to our website every day and are starting to recognise us as a company.”

Zopa took home the Editor’s Choice Award based on the platform’s pioneering work over the past nine years, and its success in creating perhaps the most wellknown brand in the space.

Upon winning the award, CEO Giles Andrews told us: “We are delighted, and the event shows how much the industry has grown up.”

RateSetter’s other awards included the People’s Choice Award, P2P Consumer Platform of the Year and Most IFA-Friendly Platform.

One of the event’s most hotly contested categories was the Most Innovative New Entrant award. After a multitude of applications from next-generation operators from the UK and Europe, it was UK-based debt consolidation specialist QuidCycle that came away with the honours. CEO Frank Mukahanana was delighted.

“For us to win against so many other platforms is a big endorsement for what we do. If you know how many entrants are coming into the industry, it’s absolutely amazing and all of them are niche, it says a lot for us to win.”

07827 324131 ryan@altfi.com

Business Reporter · November 2014 · 21

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T

he NACFB is proud to have 115 alternative funders working with us as patrons, and we also have Lloyds, Barclays, Santander and Royal Bank of Scotland working alongside us. Yet, according to the Competition and Markets Authority (CMA), “essential parts of the UK retail banking sector do not meet the needs of personal consumers or SMEs”.

One of the “barriers” (to use the CMA’s word) is that big banks are sucking up a lot of the business

that’s out there. The Big Four are responsible for four-fifths of small business loans (CMA figures).

Divide the remaining 20 per cent among the 115 alternative funders and you can see the inequality.

However, when we hear the CMA’s claim that barriers to entry and expansion for new lenders “remain significant”, it sounds at odds with the rapid growth in alternative lenders that we’ve seen ourselves. We’ve signed up 40 new lenders

in the last three years, so whatever barriers are up, they’re far from insurmountable.

There is an attitude out there among brokers: “I’ve been brokering for 10 years and never had any complaints.”

That’s all very well, but there’s a world of difference between satisfying a customer and satisfying the FCA.

Merchant Cash Advance: The benefits Customers who take a Merchant Cash Advance with United Kapital are subject to its many benefits…

• Quick application and approval Customers receive an offer within 24 hours.

• Opportunity to renew the advance Customers can take out more finance once a certain percentage of their initial Merchant Cash Advance is paid back.

• Flexible repayment The advance is repaid through a small percentage deduction of each card transaction which works in line with the peaks and troughs of trade levels.

• 90 per cent acceptance rate • Funds transferred within days

Innovations helping the SME economy flourish once again

U

nited Kapital is a Manchesterbased business which has offered finance to SMEs across the UK since its creation in 2008. Since we launched into the financial market, United Kapital has grown year-on-year as business owners have become more aware of alternative lending options and their numerous benefits.

Our company has successfully advanced millions of pounds to small businesses and independent retailers, providing them with the vital boost required to grow and prosper. Here at United Kapital, we find it rewarding knowing that business owners are able to thrive and elevate their business’

success through our funding.

United Kapital’s innovative financial product, the Merchant Cash Advance (see boxout above right), works as a flexible alternative to a traditional bank loan. We offer customers finance after looking at their average monthly sales volume, taken through their credit and debit card machine. Business owners can then raise up to 75 per cent of that figure to develop their business growth plans.

This works particularly well for the retail, leisure and hospitality industries where card-based payment is typically high. Generally, companies within this industry need finance to keep their stock

on trend and sustain a stylish, appealing interior through refurbishment.

The repayment of our Merchant Cash Advance is extremely easy.

It is repaid through the credit and debit card sales a business acquires, with a small pre-agreed percentage taken from each transaction until the advance is paid back. Many merchants love this innovative idea, because the money is automatically withdrawn at the end of their working day, so they don’t have to struggle to save a fixed amount each month. It works alongside their business activity, meaning that if they have a slow day they pay back less, and if they have a busy day, more is repaid.

Like many small local businesses, United Kapital has grown incredibly since its start-up, and for this reason it is the passion of each employee to help other SMEs do the same. The account managers have a keen interest in each business they deal with, and love to discover how the Merchant Cash Advance has had a positive and profitable impact.

United Kapital’s Merchant Cash Advance is a great way for small business owners to quickly attain the finance they need, without fear of a high rejection rate. It is often praised for helping the SME economy to once again flourish.

Tony Pegg is managing director of United Kapital 0800 756 6845 www.unitedkapital.co.uk

Adam Tyler is CEO of NACFB

IndustryVIEW

My view Working to break down barriers

Peer-to-peer powering British business

T

he business lending landscape is shifting and alternative finance is now the first choice for many.

Peer-to-peer (P2P) lending is leading the way. It is the compelling growth story of modern finance. Cumulative lending in the UK P2P market stands at nearly £2.5billion, having only hit £1billion last December. The platforms are providing a vital lifeline to credit-hungry businesses across the nation.

Over the past year at RateSetter, we have seen a rise in entrepreneurs turning to P2P lending to invest in their business. As of October, 14 per cent of our lending for this year was for business purposes. This has more than doubled from 6 per cent in 2013. The average amount of these loans has risen from £11,000 in 2012 to £27,000 in 2014 as P2P proves its value.

We are providing the next generation of business leaders with a more accessible, simpler option.

The loan is to the individual rather than the business, so there is less paperwork. For entrepreneurial SMEs, we know that the speed with which they can access capital is the difference between success and failure.

RateSetter, the largest UK peer-to-peer lending platform by monthly volume, offers a faster way of getting that costeffective cash injection into a business, giving access to funds within a couple of days rather than weeks.

The government has

recognised the significant potential of P2P loans to act as a catalyst for economic growth. In July, their British Business Bank started lending through RateSetter.

Its lending is exclusively aimed at our business loans – individuals borrowing for business purposes.

We are reaching parts of the economy that others aren’t, and the government is sending out a strong message that there are alternatives.

The government is not propping up P2P lending or underwriting any loans; it is lending, on purely commercial terms, to stimulate lending to the real economy. P2P is becoming part of the furniture.

Rhydian Lewis (below) is Founder and CEO, RateSetter, the largest peerto-peer lending platform by monthly volume 020 3567 0701 www.ratesetter.com

Industry view

Business Zone

fin A an lte ce rn sp at ec ive ial

22 · Business Reporter · November 2014

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The future

The three pillars of P2P How to reduce risk when peerto-peer lending

Who is European Capital (EC)?

One of the leaders in arranging debt financing for private-equity owned mid-market companies in Europe, with an enterprise value of between £25million and £250million. Its bespoke financing solutions have helped many leading European companies in a multitude of industries.

A

ny good investor knows they must do their research before jumping into a new asset class.

For many, peer-to-peer lending (P2P) may seem new, but it’s nearly a decade old – Zopa, the first in the world, launched in 2005. Having lent more than £660million, and the only peer-topeer lending platform to have seen through a credit downturn, managing credit risk and trust is vital to Zopa.

For Zopa, delivering consistently on our promise to return lenders’ money and ensuring we lend responsibly to borrowers is just as important as the rates on offer. Lenders must look beyond these and focus on track record and how each platform manages risk.

There are three core pillars in a P2P platform that help reduce risk…

Safeguard funds Funds such as this serve as a useful reassurance tool to cover losses when a borrower defaults. However, I believe they’re only a small part of managing risk as they aren’t a guarantee or insurance product and they may not always be able to cover future default losses. We therefore believe the next two pillars are the most important.

Underwriting The most important line of defence is having appropriate credit checks in

Why focus on the UK SME market?

place. We invest heavily in world-class analytics and expert underwriters to establish the best possible view of the creditworthiness of our applicants.

This allows us to price appropriately and ensure lenders get the right yield, as proven in our track record through the recession.

across multiple borrowers, instead of a single person. This increases your chances of return, even in cases when the safeguard fund proves inadequate.

At Zopa our mission is to provide value to everyone by making money simple and fair by reducing the risk to lenders.

Diversification

Giles Andrews (right) is CEO and co-founder of Zopa

Diversification is crucial to P2P lending and is a founding principle of Zopa.

Not all P2P platforms diversify your money, so it’s best to research which ones do. Diversification means dividing your lending into small chunks, typically £10 or £20, and spreading it

020 7580 6060 www.zopa.com

In focus: Helping lenders manage their risks

T Video special

Expert-led debates featuring the latest business innovations, filmed at The Telegraph. http://business-reporter. co.uk/videos/category/ cloud

he government consultation on a separate ISA for peer-to-peer (P2P) lenders will increase the focus on this growing sector. But with P2P lending already at £1billion for 2014, how certain can lenders be that borrowers will pay them back?

One way to reduce the risk is to make the borrower pledge an asset as security.

If the borrower doesn’t repay the loan, the asset can be sold and the proceeds used to repay the lenders.

Giving business owners the ability to develop and expand

Proplend, a P2P platform, requires borrowers to pledge the most traditional form of security: a first legal charge over an income-producing commercial property. The charge is legally documented and registered

at the Land Registry.

The rent the tenant pays the owner of the commercial property (the borrower) provides the income to cover the interest to the lenders: it’s very simple and transparent.

To help lenders further manage their risk, Proplend splits the loan into three and lenders can choose which part of the loan to participate in. The nearer the loan part is to the maximum loan-to-value of 75 per cent of

European Capital has identified an underserved segment of the SME market – those companies with turnover of less than £100million, and EBITDA of more than £3million.

These businesses are often not adequately catered for by traditional lenders such as high street banks, either because the banks view the SME market as too risky, or because they are too inflexible and require heavy amortisation of their loans.

EC believes the right solution for the SME market is one which allows management and owners of businesses the ability to develop and expand. A unirate loan facility is often the best solution.

What is a unirate loan facility?

the full value of the property, the higher the interest rate the lender earns. This allows lenders with differing risk appetites and return requirements to participate in the same loan.

When lenders are considering P2P loans, they should look beyond the interest rate – 6.5 per cent interest from an unsecured loan doesn’t offer the same risk adjusted return as 6.5 per cent on a loan secured with a first charge on an incomeproducing commercial property.

Unirate is a senior debt facility that provides a business with more capital for growth than a bank might. It is underwritten and arranged by EC and, depending on size, it holds 100 per cent of the facility, making it a highly confidential process.

Typical facility sizes are between £5million and £50million, and are normally non-amortising, giving management the ability to reinvest its cashflow. It is therefore particularly suitable for high-growth companies, or those companies seeking to fund a roll-out strategy.

020 3397 8290 www.proplend.com

+44 207 539 7000 www.ecas.com

Business Reporter · November 2014 · 23

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The debate What is the future of alternative finance?

Managing director United Kapital

Tony Pegg

Mike Kirsopp

CEO Cambridge & Counties Bank

Sean O’Farrell

Robin Rowland Hill CEO, founder Ruffena Capital Ltd

MD, investment & finance Gordon Brothers

Alternative lenders offer an array of innovative products and services which allows them to move with the needs and requirements of varying business types. We can adapt to market changes quickly and effectively, offering business owners quick and ongoing access to funds.

I think we have a good future ahead of us – the banks are slow to change and it may be many years before they start comfortably lending to SMEs again. There has definitely been an upturn in alternative lending since the financial crisis and, as people are becoming more educated about the unconventional products on offer to them, they are seeing their many advantages.

Alternative lenders offer flexible and unique repayment structures which makes them stand out from traditional sources of lending. I am optimistic they will have a successful future because more and more people are using these services and reaping their many benefits, choosing to come back time and again when funding is required.

If alternative finance means sources of finance other than from the mainstream banks, then I think the future is very positive. I believe there is a strong market for providers – but only for those that are truly committed to doing it differently.

Our own experience launching as a new provider in the market two years ago has demonstrated how much business there is. We’ve lent nearly £300m secured on commercial and residential property in a short period and demand shows no sign of waning.

I think the market is big enough for new providers, but only those that offer something unique will succeed. Our back-to-basics approach of offering simple products and processes delivered by accessible and experienced staff that manually underwrite each case individually, has resulted in customer satisfaction and recommendation rates of 99 per cent. Our model results in customers knocking on our door who have heard how refreshing our approach is, but there are still more than enough to go around.

The immediate future of alternative finance must be about getting the message out and making SMEs aware of the large amount of options they have for finance beyond the high street banks.

We need to work to make them aware that alternatives such as crowd-funded business loans – unsecured up to £250,000 – are available, that there are a host of non-bank lenders out here willing to lend unsecured amounts up to £500,000, that retailers can avail of merchant cash advances if they take debit/credit card payments, that you can use your pension to fund your business or that if you need an overdraft you don’t have to go to the high street banks.

At Choice Loans we specialise in alternative finance for businesses and try to offer as many debt-finance options to our clients as possible.

Just because a bank, with its rigid check-box loan approval process, declines a loan, this doesn’t mean it can’t be funded.

“Alternative” options for investment and finance have always existed, and always will – the real question is, what will happen to them in the next few years?

The plethora of peer-to-peer lending, crowdfunding and other increasingly specialised alternative investment platforms suggest a burgeoning but fragmented market that will naturally suffer, or enjoy, a period of consolidation at some point in the future.

This evolution is still in its early stages, but should be good for both fund seekers and capital providers.

However, at present, we do think the myriad options make it harder for both groups to choose who to work with and why. Our advice is to be clear about what you are looking for, and do some homework!

Ruffena blends equity and debt capital for the benefit of professional investors and investees, so whichever side of the table you are on, ensure we are one of your ports of call.

Borrowers should expect a continued diversification of funding sources, for firms on both the higher and lower ends of the SME market.

On the upper end of the market, direct lending funds, including alternative financing providers, will continue to increase their presence in Europe. 2015 should see an increased presence from US funds, as well as the establishment of direct lending arms by large financial institutions not previously known for their presence in the loan origination market.

On the lower end of the market, continued activity in the asset based lending and invoice discount market will serve a portion of the market, while smaller business should continue to benefit from the growth of peer-to-peer lending and crowd finance platforms, which are increasingly attracting capital and partnering with established names – creating an additional layer of sophistication and credibility.

01494 410125 www.choice-loans.co.uk

0844 579 1086 www.ruffena.com

www.unitedkapital.co.uk

www.ccbank.co.uk

Managing director Choice Loans

Eli J. Appelbaum

+44 20 7647 5142 e.appelbaum@ gordonbrotherseurope.com

Spotlight: Offering a more flexible finance solution

I

t’s hard out there for SMEs, and the traditional banks aren’t helping. A lack of cash flow is stifling small businesses. Big companies continue to pay their suppliers late and the established lenders are being excessively cautious, leaving SMEs in the lurch and the economy in a bottleneck.

Firms are going out of business every day because they can’t access the financing they need to survive. An alternative is required.

Government initiatives in the UK and beyond acknowledge this fact and push for better treatment for SMEs, particularly with regard to prompt payment from customers.

Tungsten applauds these initiatives but sees little evidence that much is actually happening.

We launched Tungsten Finance to give SMEs a more flexible financing solution than the outdated factoring products offered by increasingly unsympathetic traditional banks.

By providing an early-payment service via Tungsten’s e-invoicing network, we can help suppliers gain quick and easy access to money owed to them when they need it.

Combining digital invoicing with a dedicated funding source creates a more efficient business model where it’s economically feasible to reach the full supply chain with a financially attractive offer.

We offer SMEs an alternative and reliable source of finance that is based on their customers’ approved invoices and sourced from Tungsten’s access to dedicated funds. Capitalised

through Tungsten Bank, a UK regulated bank with the infrastructure and cost base of a modern, technology-based company, Tungsten Finance delivers quick and easy access to cash flow through early payment on invoices selected.

“This is a completely new way of financing your receivables – no hassle and no handcuffs. It’s great for flexibility and access to our cash when we want it,” says James Conway, the FD of a SME and Tungsten Finance customer.

Traditional trade finance has offered a solution to some, but failed for many. Tungsten Finance is the alternative. info@tungsten-network.com www.tungsten-finance.com