There is no point pretending anymore. It is really tough out there. The tell tale sign was that the TV adverts are all about what you can buy with just one pound (Bird’s Eye) and how to rustle up great meals from left overs. [Incidentally, did you know that the person who invented the technology behind frozen food was called Bird’s-Eye? I don’t know if he was a captain though.]

You can be as optimistic as you want, but the economy is not in a good way right now. The chairman of my Fund management business, Howard Flight, who knows a thing or two about banking crises and the effect on the general economy, has said that any new business which does not already have revenues can forget about getting funding from business angels.

To my enormous disappointment, many of the businesses I have invested in have really struggled and some have not survived. However, people with money do face a dilemma; what do they do with their money?

Interest rates are very low at the moment. Savers are typically getting just two to three percent return on their deposits. At those rates, it makes sense for investors to seek a better return from other sources. On an anecdotal basis, what I have noticed is an increase in the amount of companies obtaining funds from angels but as loan finance rather than straightforward equity.

The Fund Management business I am involved in actually makes loans available to distressed businesses. Because of the timing of when we are asked to make loans available, we are usually able to get very good terms from the business.

So, I think the paradox of low interests rates may be to make investing in companies via loan instruments more attractive. Certainly, I realize that investors still have an appetite for investing in companies, but they are now more concerned about managing their downside rather than only seeking an upside.

Companies looking to raise funds will have to be more creative about how they raise funds. Over the next few weeks, I will be writing about how these instruments typically work and how companies may structure these deals. I hope this is useful.

Related articles

• Angels are Slowing Down (killerblog.com)
• Does Stockmarket Crash = Startup Crash? (medirected.com)

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