Small Business Funding Insights From Metro Bank’s Capital Raising Move

Green Park Metro Bank, London,England. (Photo by Peter Dazeley/Getty Images)

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At the start of October, share prices for Metro Bank plummeted after reports that the lender was preparing to raise up to £600 million in capital to help boost its balance and continue achieving its business goals.

To do this, Metro Bank considered various debt and equity solutions including selling shares, bonds and some assets such as a portion of its mortgage book.

Less than two weeks after the share drop, Metro Bank announced they had secured a package of £925million. That number includes a £325 million capital raise from new and existing investors and £600 million from debt refinancing. Spaldy investments Limited, owned by Colombian billionaire Jaime Gilinski Bacal, led the equity raise by contributing £102 million and will become the controlling shareholder of Metro Bank.

The challenger bank opened in 2010 and was the first bank to open in the UK in over 100 years.

What Does This Have To Do With Small Businesses?

Raising money to meet business objectives can be a necessary task for any size organization.

Crowdfunding is a good option for start-ups, as there are much lower barriers to entry compared to accessing traditional bank loans. Plus, just running a campaign helps with marketing a business.

Crowdfunding vector illustration

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Types Of Funding

Rewards, debt, equity and donations are the main forms of funding. For small businesses that aren’t yet established, rewards and donations are the simplest to receive.

Have 5 to 6 creative reward packages for different amounts of funds that people give. If the business is product-based, then offering some kind of limited edition product, or launch event invite are ideas for rewards. Service-based businesses could offer a consultation, discount on services or priority bookings to investors.

Donations are exactly that. Money that supporters give to your cause without the expectation of something in return.

Things To Consider

If you are raising funds to launch a business, once a campaign is in the public, your idea is not protected.

Some platforms won’t release any funds if the campaign doesn’t reach its target, so it’s wise to start with a smaller goal initially. Once that goal is close to being hit, then the amount of the total goal can be increased.

Also, you should think about:

Why do you want to crowdfund?
What will it do for the business?
Why should anyone care?
How much do you want to raise?
How will the money be spent?

Which Platform To Use?

GoFundMe, Kickstarter and Seeder are some of the more well-known platforms. However, there are over 90 crowdfunding platforms in the UK crowdfunding market. Use this directory to help you find the most suitable one for your business.

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Tips For A Successful Campaign

Have a strong online presence for your brand. This means all social media and websites have clear messaging and are up to date.
Before launching, create a buzz in your networks. Ask for their support in advance, so that when your campaign goes live there is already momentum.
Create a video pitch to add to your campaign. This should be a compelling 1 to 3 minute video that includes your founder story and tells people why they should invest. This is a great sales tool and doesn’t have to be done by a videographer. Having a phone video is better than having nothing at all.
Have a solid marketing plan. Decide where and with whom you will share your campaign. Do you know any journalists who can help get your campaign seen? Will you run ads?
During your campaign work on it for at least one hour a day posting updates, getting more press, and talking to people about it.
If there is one person you would love to have on board because of their connections or expertise, think about how you can get them in your corner and then take action to do just that.

As with all financial decisions, seek advice from trusted advisors and accountants.