SIF £10k+ BRIEFING FOR TIER 4-7

1. SIF £10k+ BRIEFING FOR TIER 4-7

2. What this session will cover • Your role. • Submitting an EOI. • Criteria for SIF £10k+. • Some Do’s and Don’ts. This session relates to SIF £10k+ Capital and Job Creation. As discussed this morning, you should refer RD&I cases to WIN RMs and Export cases to IBW Trade teams.

3. Your role for SIF £10k+ • Develop action plan with client. • Assist client to submit EOI. • Assist client to secure other funding. • If £75k+, involve Invest Wales in pre-application meetings, using action plan and executive summary to introduce the project. • Guide clients and manage expectations. • Assist client to make SIF application. • Conduct ROI test (if ROI fails do not go to application. Consult.).

4. Differences from <£10k process • EOI process. • SIF £10k+ application forms. • No SIF 2 form (the case officer appraisal). • Business Plan if available - required if £75k+. • Financials on ‘with’ and ‘without’ basis (projections and appendices). • The RM returns the application to Invest Wales: Quality checked, action plan, case minute (handover).

5. Managing expectations • Say No at an early stage if you need to. • Work with client to identify minimum level of SIF needed. • Lead the discussion away from maximum state aid limits. • Bear in mind balance of SIF against other funding and (if £75k+) cost-per-job. • What is the ‘cost per job’ versus the ‘value cost per job’ balance.

6. Submitting an EOI • EOI should come out of your action planning meetings with client. • Encourage applicant to complete EOI fully. • Check you are confident that the information is accurate and factual. • Submit to Invest Wales – make sure your T4-7 provider details are on EOI.

7. Decisions on EOIs • Invest Wales turnaround target is 3 working days. • Invest will normally give you a Proceed or Stop decision. • Invest may highlight particular concerns/ issues to follow up. • If decision is ‘Proceed’, access SIF £10k+ application forms from Extranet or Invest (Under 75k only).

8. Criteria for SIF £10k+ • Location. • Sector – EC restrictions. • Displacement – over capacity in some sectors. • Net benefit to the UK economy (eg. not relocation). • Activity – capital investment. job creation linked to capital investment. • Jobs – new, safeguarded, maintained. • Statutory/State Aid compliance. • ROI. • Viability. • Additionality.

9. The ROI • Measures the capital investment against the returns in profit (PBIT) and wage expenditure. • Allows for uplifts in certain sectors and regions. • You need with & without forecasts, and projected jobs by salary band. • Beware of extending the period to achieve a pass, or using pure guesswork.

10. ‘Capital’ and ‘Job Creation’ support • For capital support, the eligible cost is the project capex. • For job creation support, the eligible cost is 2 years’ wages +NI for new jobs. • Job creation projects must also have some capex which must be linked to the new jobs. • Job creation support usually more suitable for knowledge-based industries and service sector.

11. What do we mean by ‘safeguarded’ and ‘maintained’ jobs? • Applies to capital support. • Jobs are only ‘safeguarded’ if they will be lost without the project. • ‘Without’ forecasts need to show the job losses and this must be realistic. • <£75k offers normally require ‘maintained’ jobs – ie. all existing jobs must continue.

12. Viability – what we consider Financial • Current financial position. • Financial forecasts. • Funding. Technical & Commercial • Support for sales forecasts. • Technical Processes. • Market / Commercial. • Management & labour.

13. Additionality What is the case for support? • Financial constraint. • Financial or commercial risk. • Mobility. • Commercial return. • Accelerated project. • Property cost/value gap.

14. Level of Support • Will be no more than is necessary to allow the project to go ahead. • The maximum potential level of support will depend on: - size of business. - nature of the investment. - location. • Cost per job guidelines.

15. Repayable Support • Performance-based repayments may be included in offers. • Normally only considered if offer is £150k+. • Repayment trigger is based on future turnover in a given period e.g. £100k repayable if client’s turnover reaches £5m in 3 years after project. • Suitable for projects with potentially high returns and where SIF is required due to initial financial constraint or risk.

16. Appraisal Process Assuming a requirement for financial support has been identified £10k to £75k • Invest can attend meetings or offer advice if requested. • Invest appraises the application. • and issues formal offer of support. £75k upwards • Appraisal teams involved pre application invite. • Don’t involve Invest TOO early. • Invest negotiates the level of support. • Agree to the issue of the application form. • Invest appraises the application. • and issues formal offer of support.

17. Delegated Authority • Up to £100k: Senior Appraisal Team. • £100k to £350k: Head of Branch. • £350k to £499k: Head of Appraisal. • £500k +: WIDAB / Minister.

18. Other Issues to bear in mind Funding Balance – generally there should be new cash funding from the business owners and commercial funders. SIF should not be the largest funder. Salaries – salary levels on new jobs will be made a condition of support, so check they are realistic. New Deal Premium – additional £6k per head for any individuals recruited from New Deal schemes or other long-term state benefits. Counts towards state aid limit for project.

19. Other issues to bear in mind (cont.) Quality assessment – applications will be rejected if they score under 50%. Risk Assessment – if project is high risk, Invest may decline support or seek mitigation e.g. security, guarantees, extended payment profile. BREEAM – generally ‘Excellent’ is required for new builds above 10,000 sq ft. Relaxations for smaller units. Consult DE&T Property Teams at early stage.

20. Monitoring and Payments • Payment made against achievement of targets set out in the offer letter. • Jobs and assets remain in conditions for a period after project completion. • If fail to comply with the terms the Assembly Government has the right to withhold or reclaim support. • Defrayed & Incurred issues. • Phased payment profile. Need for Bridging. • 20% Retention.

21. Some features of good applications (i) Format and Presentation • The narrative and the forecasts are consistent. • Background brochures, literature, photos. etc. are supplied. • The narrative addresses the project’s weak points head-on (anticipates likely difficulties for the appraisal). • Business plan / application is fully owned by the applicant and is part of its wider company strategy.

22. Features of good applications (cont.) (ii) Content • Additionality argument is clear and well supported (What won’t happen without grant?). • Financials flow from statutory accounts through management accounts up to current month and into project forecasts. • Confirmation of funding. • Detailed assumptions and explanations behind historic, current and projected performance.

23. Other positives…. • Don’t just fill in the boxes on the form. • Under 75k appraisal is largely desk based. Make the most of the opportunity to present the project. • Tell us about potential orders, about environmental positives, employee development. • Quality check the application – is everything enclosed, ordered, explained, and is excellent.

24. Common Weaknesses in applications • No evidence provided to support sales forecasts. • No evidence of the opening cash position for the financials. • Application is for maximum state aid percentage. • Financial Constraint claimed when clear potential for other funding, or the cashflow projections show the project can be funded .

25. Common Weaknesses in applications (cont.) • Project reduces company’s profitability / productivity or suggests insufficient returns on investment. • New jobs not shown in the forecasts. • Conversion into a limited company generating an artificial gap funding need.

26. Common Weaknesses in Applications (cont.) • There are other closely linked businesses but no information is provided. • Funding package would make SIF the largest risk-taker. • Shareholders are not proposing to make any new cash commitment. • Quality of project does not justify the grant sought.

27. Scenario 1 An insurance selling business approaches you. It plans to create 5 new jobs and will need to spend £10k on new desks and phones. The firm has a £25k unused overdraft available. What issues might you need to address?

28. Scenario 2 A food processing company approaches you. It plans to buy a new building for £400k and spend £200k on a cutting and packing line. The project will create 2 new jobs and safeguard 4 jobs. The firm has an offer of a £150k commercial mortgage. What issues might you explore?

29. Invest Wales Contact details www.business-support-wales.gov.uk Tel: 03000 6 03000 Appraisal teams: S East Wales – 02920 828969 S West & Mid Wales – 01792 224555 North Wales – 01492 542511 (includes Meirionnydd)