Funding & Financial Services: the way to get it right.

Funding and financial services is in our blood. The core business of Projects RH is to link our clients with good projects with money. Each day we work with our clients to build their case and market it so that they can raise funds to grow their businesses. We are very fortunate we work diligently with selected specialists, our strategic partners, to ensure our clients receive the best services to take them on the next step in their journey.

We need be clear that Projects RH does not provide funding; we work with strategic partners who are appropriately licensed to provide such services. Our business model is that our client, generally company, through its founder and directors and, increasingly management, deal directly with the finance and financial services provider. We see our role is that of a locum corporate treasurer or finance director providing skills that companies need at various stages of their development and very few could justify having on a full-time basis. One of our clients remarked Projects RH is part of the gig economy – we engage you when we need you. Increasingly we are seeing our services demanded also on a monitoring basis; one of our team acts as an advisory board member, advisor to the CEO in 2020, and does a strategic review on the financial on a monthly basis.

Investors and lenders want to deal with the people who will be having responsibility for managing their money – advisers and consultants need to know when to stand back!

Projects RH works with its clients, and our strategic partners, to introduce potential investors or lenders to exciting projects and opportunities. Our work extends across national borders because we seek for our client’s investors who will assist with the business as well as invest. Our core business is we connect projects & money. We work to ensure our clients receive warm introductions to potential investors and lenders.

By introducing a new company to investors or buyers of its products/services our role is one of communications, whilst accounting made will be said to be the language of money, it is by its nature backward looking. Attracting investment is the lingua franca of applied finance and a very different journey. Each client needs a combination of both.

Funding and financial services in 2020

“2020 saw five years change occur over a span of five weeks.” to quote Sydney management consultant Mark Hodgson. At projects RH we do not think we saw anything that was incoming, it just happened fast and most of us were not expecting it. 

Projects RH was in a better position than most as we had critical strategic alliances. We were dealing with other specialist firms who understood client empathy and service were critical, and despite the events, remained constantly available and were not overwhelmed by switching from inner city offices to working from home using videoconferencing.

Funding and financial services, at least in Australia, Singapore and Hong Kong, remain effectively as they were in 2019. What is important, however, is that the communications methods have changed in the process is faster and harder. In short, you have one opportunity to shine.

2020 is “need” for funding

Many of our clients saw a need for urgent funding as they experience lack of payments, failure to receive committed funds from investors and lack of sales due to the pandemic. They also discovered that rightsizing can be a costly business as many leases are not easily terminated and saying farewell to staff can be exceptionally expensive in notice payments, untaken annual leave and redundancy entitlements. Several of our clients had understood they had “provisions” for these but had not understood the provisions are not cash. Equally, for many of our founder/directors, closing the doors was not an option as they had given personal guarantees and faced directors’ liabilities for trading and solvently if they procrastinated too long.

The majority of clients of Projects RH are rapidly expanding organisations, often with a new product which they wish to take to market. These organisations may have had good budgets, and the management team who are conducting their business development in line with the funds they had received from investors and/or lenders  normally come with a personal guarantee of a family member.

The Need for Funding

The story of most businesses is that they need money to grow and to continue their operations. For the largest companies and the smallest, the challenge is always to conduct the business in the best interest of their stakeholders. So even if they are profitable there is an important decision to be made about how much of that profit should be paid to shareholders and how much should be retained to grow the business. In Australia, this is complicated by the fact that companies can “frank” their dividends. Franking means that they can transfer the tax benefit on the profit they have paid tax on to their shareholders. An Australian company will pay an Australian resident tax payer /shareholder dividend plus a franking credit. An Australian resident taxpayer will add the two and say our total income is the dividend received plus the franking credit and will use the franking credit to offset the whole or part of their tax liability on the dividend received. In some cases, the recipient will receive a credit (a tax refund).

The second story for any business is that their cost of borrowing is generally less than their cost of equity and the interest they pay is tax deductible. This is an area that invariably leads to discussion of how much debt, discussed normally as “leverage”, is wise for a company to have. The second part of such a discussion normally surrounds the need for a buffer in case there is a change in circumstances or a major opportunity arises – we need to borrow to acquire another company or an asset which is suddenly become available or to deal with a black swan event.

These are important discussions for companies to have internally, and they need to receive appropriate advice. When they have received appropriate advice, they will need to engage with a professional to raise them more equity and/or more debt. Very few clients come to us wanting to reduce their business. Even those wanting a divestment have immediate plans for the money.

The impacts of Covid 19 have shown us that it was important for our clients to have had credit lines which they could draw on and to have not been over-geared. Secondly, it was important that they had good financial models, business plans and good relationships with their financial planner and credit arranger. We were very pleased that our strategic partners quickly stepped up to the mark providing updated business plans, financial and credit advice. Critical for many them on was having a good accountant who was able to lodge updated BASS returns and demonstrate that they are entitled to “JobKeeper” enabling them to keep key people working on their projects even if it was not full-time.

Brevity and communication

2020 is seeing how people work change. In dealing with bank an investor analyst, we are increasingly dealing with people working from home. These people have many pressures including incredibly large email inboxes. What is important is our communications are clear distinct and brief. The outcome of each needs to lead to them committing more time to understand our client’s business opportunity or financial need. The bankers are not coming to the offices of our clients for a cup of tea.

We are seeing increased success by using a three minute video clip about :

• what the problem is.
• how the company solves it.
• what is in it for the investor and the surety of return to the lender.

We now understand that having looked at these video clips the analyst is most likely then to Google the company and the CEO. The preferred place to go is LinkedIn followed by their websites. There needs to be a clear and consistent message about what the business opportunity is and how it is being pursued.

The story must evolve first from the teaser, then to a pitch deck and then to an information memorandum or business overview. The latter document normally incorporating much of the data contained in the business plan.

It is critical that the material provided is distinct, clear and interesting so that the reader continues to understand the story and hopefully reach the conclusion that we are seeking.

Financial Services:

Projects RH works with a number of parties who provide financial services. We provide a warm introduction for our clients to strategic partners as they are relevant. Projects RH does not hold an AFSL nor does it undertake services which would require one.

Depending on the client we introduce people who can assist them from other strategic partners which include:

• credit providers
• financial planners
• accounting and tax advisers
• legal professionals
• Valuation consultants
• board selection consultants
• Independent experts for report writing
• film and video consultants

 Change of emphasis

2020 has seen an increasing demand from investors and lenders that their clients show that they are robust, flexible and innovative. The attitude is consistent across the sectors.

Over the last 25 years I have done a lot of work associated with mining. Australia’s mining has continued to be producing and low-cost despite Covid 19. There is an important reason for this, it uses the most advanced technologies and is surprisingly capital intensive. At a time when most the world’s mining is done in highly labour-intensive ways, and is closed because of Covid 19, the Australian industry flourishes and global investors are seeking investment opportunities.

Despite our deep concerns the Australian economy is seen in the rest the world be relatively well-performing. Our application of technology is acknowledged internationally and at projects RH we are seeing interest in investment in fin tech, SaaS and AI technologies.

Play the game by the rules

In these days uncertainty if you are engaging in funding and/or seeking financial services you need to play the game by the rules. You get one shot at it. You must be prepared and put your best foot forward. We know that, by working with Projects RH, you will be able to seize the opportunities which are there for those who are ready.

Paul Raftery, Director Projects RH – August 5, 2020