Drinking from a fire hose
Financial help is available but choosing the right option for the channel is more difficult than ever, says Peter Urey
Resellers are born survivors. They adapt quickly, use all available resources, and there is plenty of alternative finance to be found if you know where to look. Public policy is to support fast-paced innovative businesses and VARs and IT product developers will exploit the opportunities.
However, as in all these initiatives, you need to learn the ropes first. A good place to start is gov.uk, which hosts a great resource that can help you quickly discover all available sources of alternative finance. See https://www.gov.uk/business-finance-support-finder.
The site is easy to use and filters by business type, region, company structure and objectives. With five clicks, you're there – not bad for a government site.
However, the number of results can be overwhelming; it's a bit like trying to drink from a fire hose.
A sample search based on search filters for a limited company in London with growth ambitions in the IT sector suggested 37 different sources of funding: http://tinyurl.com/btxnkqg.
Each scheme carries its own terms, conditions, and has its own application process.These can run to several thousand words. In the case of the Technology Strategy Board, a grant of £25,000 can entail deciding which of 25 precisely defined categories best suits your situation.
The time required to understand all this can make it feel rather counter-productive. It is information overload.
Some sources are specific and easy to filter, while others have rather vague and general-sounding names, such as the European Investment Fund or Business Finance for You. These terms will mean nothing initially to the reader, and the related documents are not easy to read either.
Others are given branded names by the departments that administer them, and these brands similarly give little away.
Clearly, the simplicity of the search masks the complexity of the underlying detail, which grant-awarding bodies and tax authorities keep close to their chest. It seems churlish to appear ungrateful for the wide range of funding on offer, but bewildering complexity does nothing to help those who need assistance.
The uptake rate of the most important of the schemes, R&D tax relief, is about 10,000 SMBs. R&D tax relief will deliver the best rebates, averaging at about 15 per cent of solution development costs for the year of claim and the two previous years. The average claim value is more than £40,000.
Yet there are 150,000 businesses in the UK with 10 or more employees. Such low uptake surely fails to reflect the true level of the UK's industrial inventiveness.
Of the 10,000 claimants, about 2,500 are categorised as business services, which includes IT. HMRC is currently giving serious consideration to claims related to cloud computing and SaaS, given the level of innovation required to create and deliver new services.
Annoyingly, an award from one scheme can disqualify a business from another. Some types of funding are classified as notified state aid, and once you accept any such funding the level of return from the SMB R&D tax relief scheme more than halves – so beware.
Cutting red tape in the alternative finance sector should be a priority. Advice is on offer, from independent bodies such as ourselves, on the most appropriate scheme based on all circumstances.
In the absence of traditional bank funding, navigating the maze of government sources will become an increasingly important skill. The better resellers will either master it or work out who to turn to for a quick answer on suitability.
Peter Urey is management consultant at Fearless and the MPA Group