Published: May 03, 2019
The varied landscape of established businesses means selecting a funding partner that can offer flexible finance solutions, alongside a deep understanding of the business can be tricky to find. Our next webinar will explore the growth opportunities available to mature businesses, how to plan and execute development plans and how to approach a funding strategy.
But what makes a business ‘mature’ and what does the funding landscape look like for this type of business in the North East? David Nixon, Investment Manager for Maven, sets out his thoughts on growth funding for mature businesses:
Typically, a mature business is one that has become well-established in its industry, geography, or relevant sector, often enjoying a stable client base, delivering stable growth, and having a track record of generating profits. Whilst most mature businesses are typically older, it is important to differentiate between age and maturity in a business. A young company can also be ranked as a mature one if it has established itself quickly, perhaps due to a high growth market.
As a business matures it will often encounter an increasing demand for resources to fuel growth. These resources are wide ranging, but key ones include assets (such as equipment and premises), staff (usually in higher skilled roles) and the management time required to govern the expanding enterprise.
This demand for resources also creates another problem: access to finance, as acquiring assets for a mature business to grow will usually require a level of funding above the free cash flow of a business alongside a likely increase in the working capital needed to fuel its day-to-day operations.
This demand for funding can often be responsible for creating another obstacle, “risk aversion”, as the risks associated with taking on external funds can often dissuade many from pursuing their growth ambitions before they have had time to consider the huge benefits that could be generated.
There are, of course, several other areas worth considering, such as a diminishing market size, an increasing threat of competition or the ability to maintain culture in an expanding workforce, but I would say the need for resources and the ability to acquire them is one that generates the most conversation.
Today, in the North East, there is an abundant availability of capital from a multitude of sources. Understanding the options, however, and knowing how to access them can be a challenge within itself for the management team of a mature business.
Whilst accessing capital is more straight forward than many would believe, often, for a mature business, the first (and last) stop will be via its incumbent bank or asset finance provider to discuss what debt funding options are available. Although this is a well-trodden route, and perfectly legitimate, it does often mean that management teams miss out on fully reviewing offers from alternative providers that may make more long-term sense.
Maven is one such provider offering a wide variety of debt and equity funding structures to support local business in everything from development capital through to buy outs. The Finance Durham Fund is one route we offer to mature businesses either within Durham or looking to relocate to Durham, and we look to invest up to £2 million for a wide variety of scenarios.
What is most important is not to make assumptions about which type of funding is right or wrong without first having a conversation with potential finance providers and understanding what the art of the possible could be.
To find out more about the hallmarks of success when it comes to growth funding for mature businesses and the importance of a long term funding solution, join our next webinar to discover the opportunities available to local businesses.