Know your enemy: how TMT firms can sidestep historic obstacles to investment
Alternative funding could be the answer for firms asked to limit their growth to fit a lending template that doesn’t match their needs, says BOOST&Co’s principal Chris Mears
“ Entrepreneurs can face pressure from lenders to slow the rate of growth and dampen their ambition. We know the timing is crucial: their opportunity is now ”
Amid all the talk of “building back better” after Brexit and Covid-19, one group of business people stands out: the entrepreneurs driving the technology, media and telecommunications (TMT) sector, who are crucial to developing an economy fit for the 21st century as the world undergoes rapid change.
Given the advancement of artificial intelligence, increasing automation and the urgent need to reduce our impact on the environment, it is more important than ever for lenders to support innovative businesses, fuelling them with the right funding to create jobs and stimulate growth.
The alternative lender BOOST&Co has a long track record of supporting ambitious TMT firms, and is rapidly increasing its investment in this sector in the south west, as awareness of the alternative funding market grows. The lender has reported a major rise in transaction pipeline since its recent appointment of three new principals: Chris Mears, covering the south west and Wales, Matt Vincent in the Midlands and Martin King in the Thames Valley.
Promote growth, don’t limit it
For all their importance, though, TMT businesses have a major problem: traditional funding models “often just don’t work for them”, says Mears, who is “frequently approached by SMEs reporting that funders want to limit their growth to fit their lending criteria”.
Funders often take an approach led by a firm’s historic performance, the availability of tangible security and a lending assessment based on a tick-box template, “which can result in entrepreneurs facing pressure to slow the rate of growth and dampen their ambition. Our experience is that as well as gifting an opportunity to the competition, this can be extremely dangerous, resulting in inadequately funded projects failing at the first hurdle,” Mears says.
In fact, TMT businesses have unique characteristics that must be recognised when funding is structured. These companies need to be agile to seize opportunities and remain competitive, but they normally have little or no tangible security, and their debt requirement can be a lot higher than traditional lenders are able to support.
Funding plans must be flexible to help TMT companies achieve a breakthrough and the competitive edge they need to succeed, so it is vital that expert lenders such as BOOST&Co are willing and able to step in. “These firms have ambitious plans for growth, and the timing is crucial: their opportunity is now, not in two years’ time,” Mears says.
With long experience in the TMT sector, BOOST&Co can provide flexible funding based on a company’s growth strategy and opportunities (not just the security available), and will often lend significantly more than the banks, enabling SMEs to grasp opportunities without sacrificing equity.
We are bolder than the banks
“We can fund firms before they reach profitability, as long as we can identify a route to becoming profitable,” Mears says. “We look at their plans, their management capabilities and the competitive landscape: historic performance is only one part of the story.” He adds that the lender supports management buy-outs and buy-ins, given that succession planning in these types of businesses needs to be considered early.
BOOST&Co gets to know companies quickly, so that their management teams can reduce the time and energy they spend on fundraising. This enables SMEs to remain focused on growth, with the confidence that their plans, once funded, are fully resourced. “My years in the army taught me that no plan survives contact with the enemy, so we ensure we provide sufficient headroom to deal with the unexpected,” Mears says.
So, if your business has struggled to secure funding because of the historic obstacles to investment encountered by TMT firms, it may be time to consider the alternative. An expert lender like BOOST&Co can provide the ammunition to fuel your growth and defeat any difficulties that the enemy sends your way.
To find out more contact Chris Mears: Call 07761 747 307 or email firstname.lastname@example.org
Connect with Chris on LinkedIn: @Chris Mears