In response to the ongoing crisis being faced by many small businesses as banks withdraw overdrafts and credit facilities, Addidi Business Angels has drawn up a Small Business Survival Guide to provide owner-managers with strategies to survive the downturn.

“Many businesses have come to us offering to sell equity when they would not have done so a year ago because they are being abandoned by their banks,” says Anna Sofat, founder of Addidi Business Angels. “Although we are keen to make good investments, we don’t like to see entrepreneurs – the future of the economy in many cases – selling equity under duress. So we asked the experts on our investment panel to draw up some advice to help owner-managers survive the downturn and emerge stronger. This includes both strategic and financial tips as good businesses often fail because cashflow is not managed and that is a risk now more than ever.”

The advice is divided up into strategic pointers and specific financing methods that small-businesses should consider in order to minimise their working capital requirements from banks. They have been compiled by Addidi Business Angel’s investment panel, which is lead by Janardan Sofat – former COO of Business Link London and London Director of the Small Business Service.

Addidi Business Angels is the first business-angels organisation founded specifically to allow women to invest in new and small businesses. It is currently raising stakes of £20,000 from women with an interest in supporting entrepreneurialism.

1. Small Business Survival Strategies

1. Show your clients and customers some extra love. They will be going through trials and tribulations of their own, so let them know you value their support.
2. Listen to them. Find out if your offering is still appropriate to the new economic climate and work out how you could adapt it to the circumstances 
3. Get tough on your suppliers. There will be renewed competition among them so look for new quotes and ask for reductions. 
4. Cut overheads. Landlords are desperate to fill office space so you could reduce overheads considerably with a few day’s stress and some new stationary. Don’t be post-code proud! 
5. Spend cleverly. There will be a lot of second-hand equipment on the market. Let liquidators know what you are interested in and bring forward acquisitions if you see a bargain. 
6. Stay in touch with good people with specialist knowledge who will be coming into job market. Some well-timed consultancy could help both them and you, and pave the way for a future relationship. 
7.  Try some guerilla marketing ideas that you can put into practice yourself, or using friends or relatives. 
8. Inspire confidence in the bank. Develop a strategy for dealing with the downturn and call the bank before they call you. Let them pull your competitors’ credit, not yours! 
9. Don’t economise on the things that count! If a particular marketing channel or employee makes a special contribution to the business, ring-fence the budget 
10. Get more out of your people – small equity stakes could create sea change in commitment and morale. Use this in place of pay rises / bonuses if necessary. 

2. Small Business Survival Finance

1. Factoring allows you to raise money against outstanding invoices by selling the invoice – at a discount – to a factoring company, which then collects the debt. Factoring has the advantage of getting money quickly, avoiding bad debts, smoothing your cash flow and having finance secured on the invoices. But before looking at it you should ensure people are paying up on time and bear in mind factoring is not suitable for businesses that have contracting sales.
2. Stock finance. If you have been in business for at least 3 years and have up-to-date accounts, there are a number of lenders who may finance the purchase of stock for you either on a one-off or a revolving basis, which will be secured against the value of the stock. This is mainly suitable to companies based on physical goods. 
3. Asset finance. You may be able to secure financing for new assets by offering the bank security over them and paying them in regular instalments. This sort of funding is available for new & used cars, coaches, light & heavy commercial vehicles, plant, machinery & office equipment. You may also be able to release money from existing assets via a sale and lease-back agreement. 
4. Pension finance. If you have accumulated a decent pension fund, some of this can be lent back to the business. Self Invested Personal Pensions (SIPPs) or Small Self-Administered Pension Schemes (SSAS) can lend up to 50% of the value of the fund – provided the loan is made at a commercial rate and, normally, is repayable within 5 years. (Alternatively, if the business owns its own premises, these can be sold to the SIPP / SSAS and leased back to the business – once again, the sale and indeed the lease must be on a commercial basis). 
5. Personal loans. Although many business owners use equity in their homes to secure loans for their businesses, this should not be done lightly – the last thing you would want to do is lose your business as well as your home. But other sources of personal loans apart from banks can be considered, including:

• ZOPPA – this is a website that matches personal lenders and borrowers and can facilitate loans of up to £15k.
• Microcredit – there are a number of organisation that provide small loans small business foe eg Fair Finance in East London provide business loans up to £10k for up to 5 years. 
• Family and friends 

About Addidi Business Angels
Addidi Business Angels is a unique investment club providing successful women with the opportunity to pool their financial resources and expertise to back early-stage business ventures. It is being launched in response to the fact that only 5% of business-angel investors in the UK are women* – meaning much of their capital and know-how is being denied to entrepreneurs (*University of Strathclyde). Membership requires a commitment of £20,000 over two years and is subject to approval. Addidi Business Angels is currently accepting applications for membership.