Corporate Finance & Business Investment Legal Services

Understanding your financing options is the first step in making an informed decision. Here are some of the most common funding routes:

1. Equity Finance
   • Raising capital by the sale, or issue of, new shares in the business as part of a growth or exit strategy.
   • Often used by early stage businesses with growth potential.
   • Usually sourced from private equity (“PE”) houses or venture capital institutions but can also be from private investors such as business angels.
   • Typically the investor will want some form of role in or oversight of management of the business.
2. Debt Finance
   • Includes a range of financial instruments such a term loans, revolving credit facilities, invoice finance and factoring, asset finance and overdraft facilities, to provide capital for the business that is repayable along with interest over a defined period.
   • Usually involves financial institutions ranging from clearing banks to sector specific debt providers.
   • In most cases tangible security over some or all of the borrower’s assets and property will be required and, potentially, also personal guarantees from key shareholders or directors.
   • Unlike equity finance full control of the business is retained as long as repayments are up to date.
3. Alternative Finance
   • This encompass a range of concepts that are outside the more traditional equity or debt mechanisms.
   • Examples include crowdfunding (usually providing equity so the issuing of shares is involved) and peer to peer lending platforms (“P2P’s”) which raise debt finance, often unsecured, but also often at higher rates than institutional debt as a “pay-off” for the higher risk.
4. Venture Capital & Private Equity
   • Refers to providers of Equity Finance and largely covers the same ground of investing in private companies, although “VC” is traditionally investment in early stage businesses whist PE targets more mature established companies with growth or efficiency potential.
   • VC can be used as funding for the development stage, even where there is little or no revenue or profits.
   • Investors will usually want a seat at the boardroom table to influence business growth or simply police their investment.
   • Founders’ shareholdings will be diluted and they will, to an extent, be required to report to their investor and surrender an element of autonomy.
   • The business will need to focus on growth to enable the returns on investment required by the investor. In short, the business needs to be “scalable” with a management team capable of delivering this.
5. Grants
   • Government or private grants available for specific industries or projects.
   • Does not require repayment but often comes with strict eligibility criteria.

Beyond Corporate Finance, DTM Legal provides additional expert support in HR matters, litigation, and commercial property. Whether you’re dealing with employment law, resolving disputes, or handling property transactions, our specialist teams offer practical, proactive advice to safeguard your interests and keep your business progressing.

The best financing option depends on your business’s financial health, growth objectives, and risk tolerance. Equity financing may suit businesses looking for large investments without immediate repayment, while debt financing is ideal for those with stable cash flow to manage repayments. Alternative finance offers flexibility for specific needs.

Secured funding requires collateral, such as property or assets, reducing risk for lenders but increasing exposure for borrowers. Unsecured funding does not require collateral but often comes with higher interest rates or stricter credit requirements.

A solicitor ensures your interests are protected, negotiates favourable terms, and provides clarity on obligations and risks. They also help avoid common pitfalls, such as agreeing to unfair repayment terms or diluted shareholder control.

Prepare a detailed business plan, financial statements, and forecasts. Be clear about your funding needs, how you plan to use the funds, and your repayment or return strategy.

If your business faces financial difficulties, it’s essential to seek legal advice promptly. Options may include restructuring agreements, negotiating with creditors, or exploring insolvency protection under the Insolvency Act 1986.