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Managing Financial Risk: industry experts explore and offer practical tips

Following the recent collapse of the Silicon Valley Bank (SVB) and the subsequent shock waves it sent through the business and tech worlds, we decided to host an online panel with financial, legal, and banking experts to give the start-ups we support some practical hints and tips on how to best manager their finances and assets in order to mitigate risks.

The panel was made up of Suzanne Jones, Partner at Blake Morgan; Ian Matthews, Partner at Moore Kingston Smith and Louis Spencer, Senior Relationship Manager, TMT Lead, NatWest Bank. You can read their biographies here.

Impact to the start-up communities

It’s fair to say the events had a big impact on the start-up tech communities and wider business and banking worlds in general. Particularly the speed at which the SVB situation unfolded and escalated.

Pre-revenue businesses were particularly affected and in the area of business operations, the management of cash, suddenly carried a lot more risk than they perhaps previously realised. With a swift resolution, with support from UK Government and HSBC stepping in, it highlighted that a lot of businesses and founders could do with extra thinking on where risk may be lying; how they manage their cash and what options they should understand or have available to enable better access to finance and risks overall.

Cash holdings – where should you have it?

Start-ups and scale-up businesses are in an odd position, particularly when pre-revenue, where they may have raised investment and must hold that cash somewhere. So now businesses are wondering, should they be holding cash across multiple locations and what is safe? Here the panel offers some advice on where to look & some top tips:

Louis Spencer: In a SME space and a mid-market space, it is very common for businesses to have, at least one other banking relationship. Historically, that’s always been driven by making sure that your bank is delivering you good service, good quality for money, the ability to offer sector expertise and the ability to be supported by your bank.

I think that there’s nothing to stop start-ups and scaleups taking the same approach. I think many people would probably endorse that sort of engagement now with at least one other bank.

Regarding having a Plan B, I think the collapse of SVB has perhaps acted as a catalyst for having one. Asking yourselves, what is our plan B and even other scenarios, and why you might need other banking.

Suzanne Jones: I agree, when I’m advising boards and at certain times, things move very quickly and you need to protect yourself. So we’re always looking at plan A, B, C, D….if this happens, what do you do?

Ian Mathews: I’d certainly build on that as well, I think scenario planning is key in a lot of businesses, whatever size it is. It was only a few years ago that COVID happened – where people were really stripping their businesses down to their bare basics and playing with those scenarios and cash flow.

Some good habits were taken from that – we should be looking at cash flow forecasts, managing our cash and looking at risks to the business and how to mitigate them, especially with cash flow for start-ups and scale-ups. It’s not just looking at that risk and figuring out what they’re going to do, but actually asking the ‘what if’ question – what happens if that investment gets delayed? Two months? What if it gets delayed further? It’s looking at the sensitivity around it and getting a full idea of how that fits into your larger strategy for growth and hopefully a sale.

Plan B’s & Debt Facilities 

On the topic of a Plan B – one area that companies realised with some urgency, was understanding options around access to debt facilities, or debt finance in a cash crunch situation. It was striking how few businesses had looked at those, and there were worries that they may end up with bad short-term deals. Do any of the panellists have any experience in that area? Or is there a place where businesses could go to look at how they could prepare to have access to that ?

Suzanne Jones: I was advising a board and we learned that you should be careful when you look for new facilities. Be careful which lenders you approach and find specialists, for example, consultants and brokers, who can help. They can do discreet inquiries, and applications on behalf of the company, without the company’s reputation being known or damaged.

Ian Matthews: Yes, to add on to that, there is finance available and not just current accounts, but as the Treasury says, debt finance.

I think it’s a common feature to be asset-based – to have that security against it, but pre-revenue tech businesses will struggle slightly more. Going for debt finance is something they probably haven’t considered because they would have to service the debt, but it’s something they should look at. If they’ve got faith in their model and they think there’s going to be revenue generating from it, then actually, debt finance might be a viable route in the short to medium term.

Louis Spencer: It’s tricky, especially given the context of what we’re talking about with SVB and the companies who quickly realised that it is nigh on impossible to access emergency liquidity in that type of scenario. It plays the importance of not just having a Plan B, but a plan that is proactively thought of at the front end.

It’s an area for us and other high street lenders, on how we support businesses with ‘in case of need’ facilities. It’s something that when we have a good understanding of business models, strategy management team, and have a really solid equity cornerstone we can help with relatively modest facilities on an ‘in case of need basis’.

What key things are needed for business planning?

Moving on to a slightly different theme, we’ve covered Plan B’s, Plan C’s, but I was hoping to ask you some theory – what challenges have emerged that early-stage businesses could learn from? What are the key things that they should be looking for when they’re building a business plan and risk register management process?

Suzanne Jones: Insolvency experts can add a lot, especially in identifying opportunities, but minimising risk when you (or the board) are considering the financial position and the potential risks for the company. It could be that a company only has one customer, for example, or putting all of their money in one bank – they could have two banks. It’s important to minimise those risks and all the time be thinking about identifying what the possible risks are, and how do you minimise those risks in the event something happens.

Ian Matthews: I always go to the endpoint, ultimately, we’re dealing with start-ups and scale-ups who are looking to exit. They’re looking to sell on and, if they’re not looking at the risks, their potential buyers will be. If you’ve got an EBITDA or you might have some sort of value, the sole purpose of the buyer and their advisors is to whittle down the price they’re willing to pay you.

So, if they look at these risks and realise you haven’t got a treasury policy, or you only have one sales contract or that the sales department is the owner and if they exit, you haven’t got a business (that’s a common issue that I’ve come across – is the founder is the business),  therefore you’re trying to create something fresh, a product that you, the business can sell.

It’s trying to see the short-term strategy, long-term strategy and objectives. Ask yourself, what are the KPIs that will drive that? What are the sectors I work in? What markets do you operate in? What risks are you mitigating against that? How are you monitoring and checking against this? Ultimately, against the key goals of trying to sell my business – what helps towards that? In this situation, it’s managing your cash.

For cash flow forecasts, we always recommend that you have a rolling 16/17 month cash flow as a minimum because you know where it’s going to go. And at moments of pure stress, you should be doing a 7/8 week cash flow forecast. Really getting to grips and understanding what you’re going to do with your money, where’s the money coming from and how are you going to spend it. Keep asking, how are you going to get the money to maximise your return on investment?

Louis Spencer: I know the gold standard of cash flow monitoring that the bank will quickly implement into businesses that don’t have a handle on cash flow is a 13-week cash flow forecast, which is updated weekly on a rolling basis. Whilst that doesn’t have to be granular to utility bills, understanding key revenue, drivers of cash and understanding what impact outperforming from a revenue perspective can sometimes mean less cash for your business.

It can be surprising the number of times that you come into contact with a business that doesn’t fully understand the impact of something happening in their business on cashflow, in the short term, and how quickly that can become a crisis. So understanding and continually looking at cashflow on a short-term cycle is very important.

Ian Matthews: Yes, to add to that, quite a lot of the start-up businesses that we work with, because of the investment or grants or R&D, it’s really important to understand how quickly that’s going and what your expectations were and how it’s actually performing against that.

Payment terms – what guidance can we give around this? 

One area that we had a couple of questions submitted was for businesses who are revenue generating and a common query that comes up is regarding payment terms.

Some founders might end up in a place with some larger suppliers, which can be a bit tougher with them. Is there any broader advice or guidance, for SMEs and trying to sell policies around payment terms? Whilst people are trying to be ethical and right, but in a way that allows them to be protected.

Ian Matthews: ‘Cash is king’ is a phrase – because it’s true. So being upfront and transparent, about what your terms are is key. It’s about trying to eke them out a little bit, so it matches suppliers. If you are able to, and it fits in with your cash flow and your budgeting, pay them earlier and be that ethical supplier that you’re aiming towards, but remember it has to be managed within the context of your revenue streams.

When COVID happened, our number one piece of advice was ‘identify your key suppliers’ who you want to keep on side and who, if they go bust, will have an impact on your business. Ultimately, make sure you really work the cash and credit control from your income.

Suzanne Jones: The other thing I would say is to make sure you chase sums that are due. One thing that I have seen a lot is, it could be a well-known company and you think, ‘Oh, well, they will pay there’s just a problem here, there or wherever’ but if they’re not paying, there is a potential problem for you – so be alert to that and keep chasing. If you put the pressure on, you can get some money out. So don’t ever be afraid to ask people, who owe money, to pay!

Marty Reid: We’d agree with that even from our own experience of effectively running accelerators, programmes and Innovation Centres, putting in a clear regular credit control process as part of your financial cycle, can actually just be quite straightforward. Just by having a register and diligence to chase people – it’s amazing how much and how quickly cash can start to come in. Our experience was it doesn’t necessarily need to be a member of the finance team that’s doing the chasing, as long as someone with a good operational head has the data and the informationto hand, it’s then applying a bit of rigour and chasing to help make a big difference.

Where do you go for expert advice when you’re an early-stage business? 

If you don’t yet have a full board but thinking about appointments, considering advisors, mentors, and possibly chairs – where can you go for advice?

Louis Spencer: Leadership and governance for a lot of business support organisations; whether that be in local authorities or private institutions like SETsquared, I think most people realise that if they didn’t have the answer themselves, can help to point you to someone that they might know. NatWest knows some good people and is friendly with SETsquared who are able to provide some real value around governance.

Ian or Suzanne, any top tips for founders starting to, aside from reaching out to networks or providers, if they’re starting to think about bringing in a bit of expertise to a board or a consultancy basis? Where are the best places for an early-stage vendor to start looking? Or what should they look for?

Suzanne Jones: Remember that diversity of thoughts is such a great thing. The more brains and different perspectives you have around the table, the better the ideas are. If you can find somebody who’s willing to do a non-exec role, unpaid that’s always a good place to start. When Boards are in difficulty, the best thing to do is just keep talking; keep talking to different people explaining what has happened – because there are many different ways you overcome it.

Louis Spencer: I would agree, if you’re an early-stage founder who happens to be the sales lead and the finance lead as well, finding someone that you trust, with business acumen to discuss and talk through some of the decisions you’re making, is, in effect, what a board would deliver – when you reach size and scale. That could be a real informal arrangement but delivers a massive value.

Ian Matthews: For a lot of startups/scaleups, it’s very much that they are so focused on launching, getting delivery; they work so much on the business, they never just have that time to step back and actually think about where the business is going and ask is it the right direction?

Again, coming back to getting to that end result, try and put everyone in the same direction. Coming back to one of those earlier points, banks do have this knowledge and expertise and while a lot of start-ups will go for online accounts, having a decent relationship manager, especially at points like this, having a person at the end of the phone – (COVID, again, was a classic example of this), where you can chew the fat and talk about the business; where it’s heading, and actually speak to a human being and get value from having the account, safety net and security.

Debt finance and how to value IP patents

What could be considered or used as assets support or support in debt finance? With a specific question on whether IP patents can be considered an asset when raising debt finance facilities and back funding.

Louis Spencer: Broadly speaking, most of the tangible assets that a business might have on the balance sheet, including stock, trade debts and other instruments could potentially be used to unlock funding against them. For IP, it’s one that within the NatWest group, we do have the capability to lend against IP assets through Lombard, which is our asset finance division.

We have a Software IP capability to effectively mandate a third-party IP specialist to value your code. So, we can actually assign a value to an IP and then lend an amount or an advance amount against that. There’s still a need to evidence affordability and a track record of profitability and cash generation to service that debt in the same way that you would have to do for a traditional term loan, but it just means we’re reliant on a different basket of assets in essence, but it does exist.

Future thinking – what is happening to business services and facilities?

We had one closing question, which was a little bit of seeing the future, with the uncertainty caused by the SVB situation, but also changing markets. Are we seeing any changes in either new services, new facilities emerging that are designed or could better service this area of the market that is emerging that we could keep an eye on or be optimistic for in the future?

Ian Matthews: I’ve not seen any new services, but I do know people are trying to make the most of the FCA protection service. I also think I’ve seen a lot more people looking to have multiple bank accounts.

Suzanne Jones: One thing I would say, also that I see some companies now accepting payment and making payments in crypto. So, not using cash.

Louis Spencer: Yeah, the only other thing I would add in Marty, around the outlook is, for some time, people have been running towards how can you best digitalize processes, moving away from the relationship management model, but actually, given everything that’s gone on over the past few weeks around banking, banks will probably be taking stock on how quickly they do that moving forwards and potentially reinvesting in their own cost of service models.

Ian Matthews: And likewise, I expect that some of the challenges online-only banks will probably go into that market and expand it. In fact, there is a relatively new bank, which is starting to do relationship managers since last year – very early stages but there is value to it, it’s why it’s why the high street banks have been doing it so long.

Marty Reid: We hope that the themes we’ve covered, it has helped – but we’d like to stress, that if you’re a founder that is worried, if you’re concerned, please do reach out to the SETsquared team, even if we aren’t the right organisation or the right answer, I’m sure we’ll almost certainly find the right people to help you.

Closing thoughts and takeaways from the panel:

Suzanne Jones: I think what I would say is, just keep talking. Don’t be afraid to ask any questions. No question is a silly question. Just keep talking to different people, get all the different perspectives and figure out the best way to deal with it going forward.

Ian Matthews: Cash Flows are an important part of start-ups and scale-up businesses. We’re very much looking toward the end goal. Keep reviewing it with clarity of what you want to get out of that cash.

Louis Spencer: Reach out to someone if you’ve got anything on your mind as an owner or management team, people will help, just do not ever forget that people are just inherently helpful in the tech space in particular, so reach out, I’m 100% confident they will help you.


These were great sentiments to end the panel discussion on and lots of useful advice for our members. I’d like to thank the panellist for their valuable time and input.

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