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What funding sources can I use to boost your business?

2019-08-29T11:13:40+00:00

Funding sources to boost your business

What are the funding sources?

All businesses need funding to operate and develop their projects. But, how many types of funding exist and how can we get them?

Any company, idea, or business requires financial support to reach its goals. Some help –additional to internal resources– coming from a number of the available funding sources will make the way to success easier. This post will deal with all kinds of available funding. But before that, what are the funding sources?

If funding is the process of raising these funds, the funding sources are the agents from where this funds are coming. That is, those actors such as banks, or public/private entities you can address to raise these funds.

Funding needs will be there in all periods of business activity in different forms and always focused torwards an objective. We may need funding to buy premises, machinery, invest in R&D, develop a new web, open an e-commerce line, or going international.

The different funding sources we may have access to will provide economic help for our objectives. Nevertheless, and in the case of public funding, the destination of the funds must be focused to the aim for which the funding was offered.

Funding typology and diversification

Funding sources may be divided into two typologies:

  • Internal, which are those belonging to the company or are generated from its profit.
  • Externas, que son aquellas que suponen una financiación adicional que procede de fuera de la empresa. External, which imply funding coming from outside the company’s perimeter.

In either case, it is essential stating how much funding is required in order to define the most suitable typology. It is also important to keep in mind the funding concepts described in the following tree:

Funding Sources Clave3

Internal funding is also known as self-financing as it refers to those resources generated by the company’s activity. As we see in this image, there are two types:

  • Maintenance self-financing. The business profit is kept to maintain its production capacity. This is equivalent to “provisions” and “amortisations” in bookkeeping.
  • Enrichment self-financing. Profit is used in this case in investments oriented to the business growth.

External funding, on the other hand, is that financing source which is alien to the company’s economic activity. Two groups:

  • Those financial resources coming to the company from outside its perimeter. For instance, listing in stock exchange, new shareholders, etc.
  • Those funding resources coming from outside the company. There are two kinds of them: short-term funding (such as leasing, commercial discounts,…) and long-term funding (mortgage, personal loan,…). Time is the key factor that determines a category or the other according to the refunding deadline: short-term if in less than a year, or long-term if longer.

This variety of the funding possibilities is an advantage. Any business can diversify its funding sources both internally and externally, or either increasing the number of banks with which it works or applying for the many public aids that exist at present.

External funding

Subisidies

Can I really apply for a subisidy? My business is located in a small town, can I have access to a public incentive? Are subsidies only for big companies? We would like to answer these and many other questions. We will try to explain all you need to know about public incentives and aids so that your business does not miss an opportunity.

All public authorities, never mind their scope of action (let it be European, national, regional, or local) provide companies with economic aids in accordance to their policy.

Public authorities subsidies are a financial support that require no refunding (unlike bank loans) and which are changing constantly. Deadlines, amount, and requirements vary according to the date and the authority accountable for a particular subsidy. This –plus the excessive bureaucracy– makes quite complex and tedious the procedure. It is strongly advised engaging experts in .

Despite there is a number of subsidies which vary according to the business and the economic sector, the amount is not quite high. It is also a slow process and no business should rely on them on the short term. Nevertheless, they still are one of the main and most usefull funding sources. In fact, they are a funding means which is suitable for any business. For further detailed information on subsidies, please read this post.

Funding Sources Clave3

Bank sector

Who is unaware of the funding opportunities offered by banks? Banks are, no doubt, the most used funding resource by businesses. Main reason is that it is also the most widely known and offers a great number of custom products: personal loans, mortgages, credit, discount lines, etc. On top of that, sometimes the bank may inquire information regarding the destination of the loan, but that does not mean you must necessarily use it in buying machinery, raw material acquisition, or the development of a website, as it happens to public funding.

However, it must be kept in mind it generates a financial cost that should be taken into account in the business prospects. This is why this type of funding is the quickest, most accesible, and simple for longstandign businesses. These companies typically have the guarantees that enable the loan granting. On the other hand, it is harder for self-employed persons and entrepreneurs.

The following table summarizes graphically the main advantages and disadvantages of a bank loan for a business:

Funding Sources Clave3

Venture capital

Venture capital is possibly one of the least known funding sources. But it is very interesting as regards entrepreneurs. It provides funds to those business from which a fast and successful projection is expected in case the get the necessary funds for their inital stages. They are usually startup companies with new business or tech models. Headhunters consider them a real business opportunity and also a chance to multiply their investment with the business profit. The compensation for this investment is a share in the company capital plus a managing position. Main advantage, on top of the level of resources they provide, is a legal support and third parties’ creditworthiness.

In case the company is in a very initial stage, they do not usually bet for it since the projecto is not seen clearly yet. This funding goes mainly to projects already on progress but which need a push to reach real success.

Funding Sources Clave3

Business Angels

This kind of external funding is a very particular one. The Business Angel character was born in the USA with those businessmen who supported –in the 20th century– Broadway stage productions. Transferred to the business field, a Business Angel is a person who sponsors a project because he likes it or believes in it; let that be for its innovation, impact on society or for simple personal reasons. This “angel” provides his own money (a venture capital invests money from third persons), experience, know-how, and network. That is, he involves rather more than a venture capital providing resources beyond economic funding.

Though this funding source is to be found mainly in the USA –Amazon, Skype, and Google had it in their early days–, it is also present in Spain. It is, no doubt, a useful financing source that will also accompany you (perhaps, sometimes too much) whith his know-how through the business creation process. Tech start-ups and the like are usually the kind of companies these investors are most interested in.

Funding Sources Clave3

Crowdfounding

Internet is a “before and after” for business. It cleared the way for new sales and commercialization models, as well as for new funding models.

This technology has not only allowed new means for product promotion for the entrepreneur, bus also a new source of opportunities for a project with new forms to boost it.

New forms of economic support for businesses and entrepreneurs have appeared, such as crowdunding or micropatronage. This is a collective funding means (mainly online) executed by individual persons in compensation to rewards (products, discount, acknowledgement,…) or even for simple altruism. This is one of the most popular funding source for artistic projects and is also much used as support to political campaigns by recent creation parties.

But, how does crowdfunding campaigns work? It is quite simple. The entrepreneur sends his business idea to a platform and just wait for contributions from the audience. In order to obtain a higher number of contributions it will be essential that the project be written attractively and proves its viability or support to a concrete cause.

The proposal will be accesible for a particular time, hence the importance it captures the attention of the potential contribuitors as soon as possible. Crowdfunding is an ideal financing source for those innovative projects with a high social concern so that people may feel engaged enough as to contribuite.

Funding Sources Clave3

Crowdlending

Crowdlending is also a collective funding means. It relies on the principles of crowdfunding, however funding does not come from donations, but from loans from particular persons. This allows a direct funding means from a big and diverse group of persons for all kind of businesses and without requesting a loan from a bank. People lends small amounts of money for a stipulated financial return in a loan contract.

It is fast and easy to apply, unlike a bank loan, and offers flexibilities for repayment. Nevertheless, there is a high financial cost due to its high risk. Crowdlending has become an alternative funding source when no other sources are available, especially for self-employed persons and entrepreneurs.

Funding Sources Clave3

Crowdsourcing

Crows sourcing is not a funding source as such. Its purpose is obtaining either financial or human resources for the development of a business idea. It allows task externalization which are covered collaboratively with the objective of minimizing the company’s workload. This removes a number of financing barriers.

This is a good option since it does not require economic costs and, in case the project is interesting, may lead to work with first level experts.

Entrepreneurs and start-ups usually turn to this alternative funding. It does not only enriches the project economically, but it also benefits from others’ know-how, experience and other added value aspects.

Funding Sources Clave3

FFF

FFF stands for “Friends, Family and Fools”. These are the first three sources to which any entrepreneur appeals due to their proximity.

It may seem hardly serious, but most companies started and do start working with the resources they have available in their immediate context. It is an economic help that fits any business at an initial stage.

Funding Sources Clave3

Internal fundig

External funding shows a huge variety of resources in a continuous reinvention process. Internal funding, on the contrary, is much more conservative and limited. However self-financing is quite important as it means financial independence leaving aside any external funding sources.

A business which works with its own resources conveys external confidence and boosts the approach of others for collaboration.

Internal funding comprises four main resources:

  • Shareholders capitalization: These are the economic contributions from shareholders or owners. In the case of limited partnership businesses –the most usual SMEs legal status–, partners must invest, at the very least, 3,000 euros of share capital and may make further contributions afterwards. The same applies for a self-employed person who gives money to his own business.
  • Capitalization reserves: Business organizations must have a legal capitalization reserve (which does not mean excluding a voluntary additional one) comprised of a profit percentage not distributed among shareholders. This capital works as a “piggy bank” for those circumstances in which the company may need additional funding. There are three kind of capitalization reserves:
  • Reserves coming from not shared profit.
  • Reserves coming from balance sheet.
  • Reserves coming from shareholders contributions.
  • Income statement. This is the most obvious source for internal funding, the profit and loss account. The possibility of financing the business and generating capitalization reserves will depend on the benefits obtained on the year.
  • Amortization: Any asset –either material or inmaterial– suffers a value depreciation as a consequence of the economic activity. These losses are indicated in the bookkeeping and fiscally (amortizations); hence they reduce the taxable base of the corporate tax, which means a remarkable fiscal saving.

What is the best funding source for your company?

Once described the main funding sources, this is a summary* table to check the most suitable financing source for you business.

Funding Sources Clave3

*This table shows only external funding since internal –in a way or another– are inherent to any business. The table is based on the characteristics of each funding source and its sinergy (either positive or negative) with the indicated kind of business.

What funding sources can I use to boost your business?2019-08-29T11:13:40+00:00

What is business classification for?

2019-08-28T11:05:52+00:00

What is business classification for?

Are you thinking of applying for a public tender? Is the economic amount a remarkable one? To make a long story short, business classification is useful to accredit the tenderer’s solvency and ability to act ensuring the correct performance of the service to the contracting authority.

Business classification is an essential requirement for those companies willing to apply for tenders with an estimated value higher than 500.000 €.

Whenever business classification is not mandatory, filing the registration certificate means costs savings in filing the offer for the tender since it can replace all documentation to be included in the administrative documentation file.

When is business classification necessary?

A business classification is not always necessary to apply for a tender. It is only mandatory for construction contracts with an estimated value of 500.000 € or more.

It is neither demandable for services or supply contracts regardless its value, though it may be used for this kind of contracts.

Business classification is not mandatory for construction contracts below 500.000 €, neither for services nor supply contracts, but it may be used to speed the documentation for the administrative file.

How long does the classification last?

Once obtained, business classification lasts indefinitely as long as remain the existing conditions and circumstances when granted.

In order to keep the classification, the company must justify it keeps the economic and financial solvency every year and the technical and professional on a 3-years basis. To do so, it must file the corresponding affidavit stating the maintenance of the conditions or, if not, the updated documentation with the new information to be registered.

 

How is the business classification organized?

Procedure

Business classification is organized in accordance to activity, services provided, and solvency. Companies are classified in activity groups and subgroups (subject of contract). From each category hangs a subgroup which represents the upper limit of solvency demandable to those construction contracts the company will be able to apply for.

Classification is made out of three digits, being the first the letter corresponding to the subsector into the construction sector; in second place, a number indicating –into the subsector– the concrete object of the classification; and at last, another letter indicating the upper limit referred to the estimated value of contracts for which a particular classification is valid.

Construction contractors business classification groups

First digit classifies the specific subsector into the construction subsector:

  • Group A. Earthwork and perforations.
  • Group B. Bridges, viaducts, and big structures.
  • Group C. Buildings.
  • Group D. Rail.
  • Group E. Hydraulic works.
  • Group F. Maritime works.
  • Group G. Roads and tracks.
  • Group H. Transport of oil and gaseous products..
  • Group I. Electrical installations.
  • Group J. Mechanical installations.
  • Group K. Particular ones.

Category and amount of construction contracts

The classification into one of these groups and subgroups will be given a category which will represent the upper limit of the value of contracts they can apply. It is determined by annual average:

  • Category A when its annual average is below 60,000 €.
  • Category B when annual average is over 60,000 € and below 120,000 €.
  • Category C when annual average is over 120,000 € and below 360,000 €.
  • Category D when annual average is over 360,000 € and below 840,000 €.
  • Category E when annual average is over 840,000 € and below 2,400,00 €.
  • Category F when annual average is over 2,400,00 €.

Services contractors business classification groups

  • Group L. Administrative services.
  • Group M. Specialized services.
  • Group N. Qualified services.
  • Group O. Real property conservation and maintenance services.
  • Group P. Equipment and installations maintenance and repair services.
  • Group Q. Machinery maintenance and repair services.
  • Group R. Transport services.
  • Group S. Residues and waste treatment services.
  • Group T. Contents services.
  • Group U. General services.
  • Group V. Communications and Information Technology services.

The subgroups existing into each group can be checked in articlo 37 and Annex II of RD 1098/2001, which approves the General Regulation of the Public Contracts Law.

Category and amount of services contracts

  • Category A when annual average is below 150,000 €
  • Category B when annual average is over 150,000 € and below 300,000 €.
  • Category C when annual average is over 300,000 € and below 600,000 €.
  • Category D when annual average is over 600,000 €.

 

How to get a business classification

Autonomous regions

The procedure to get a business classification is processed by the State Administrative Contracting Commitee, attached to the Ministry of Economy and Treasure.

Autonomous regions can also implement their own business classification systems, only valid for the region and granted following the national classification criteria. Some of the regions with their own classification systems are Catalonia, Murcia, Canary Islands, and the Basque Country.

The classification procedure is long and large. It takes the collection of a great amount of documentation and information. This is why, though not mandatory, it still is a good tool to speed the filing procedures to apply for public contracts.

Steps to get it

  • File a physical application form at the Ministry of Economy and Treasure or a Delegation office.
  • Telematic application can be filed at https://eclasificacion.meh.es/webclaem/default.aspx. Available forms can be checked at the contracting section at the Ministry of Economy and Treasure.
  • Application form must be correctly filled in and files attached with the following additional documentation (for both electronic and physical filing):
  • The company’s legal representative’s ID card certified copy.
  • A certified copy of the company’s Memorandum of Association.
  • Affidavit of not being affected for any disqualification for a public contract.
  • Certification of being up to date with tax obligations.
  • Certification of being up to date with Social Security obligations.
  • Authorization, if applies, to engage in the activity of the subgroup to which classification the company is applying for.
  • Certificates of satisfactory execution of the construction or services provided duly signed by the contracting authority.

 

What is business classification for?2019-08-28T11:05:52+00:00

How to file an electronic offer to a public tender in the State Contracting Platform

2019-08-28T10:38:50+00:00

We often face the same questions from our customers: how can I file an electronic offer to a public tender through the State Contracting Platform?

We would like to give you a few tips to facilitate this form of filing an offer. However, we will not miss the chance to let you know that most of the companies that apply for public tenders to support its funding and actions usually hire the services of a company expert in managing the tender procedure.

How to file an electronic offer to a public tender

Clave 3 will give you invormation, manage the paperwork, and support you through the preparation and filing process.

FAQ’s

These are some frequently asked questions from our customers:

What are the requirements to file an electronic offer to a tender?

    • You must be registered in the State Contracting Platform. Your profile in the platform must also be filled in.
    • A fast internet connection.
    • You will need the company’s representative’s electronic signature, he who has the capacity to sign the documentation requested by the contracting authority.
    • Updated version of Java software installed in you computer. In the 90% of cases documents cannot be signed in the platform, the Java software installed is outdated.

Must documents have a particular format or size?

Yes, documentation should be filed in pdf format and compressed. It is usual that the technical documentation of the public tender indicates the top size of documents. As a general rule, they should not be over 5MB.

Should I sign the electronic file if I have already signed all documentation included?

Yes. When validating documentation and before sending, the platform usually warns it is mandatory signing the files. It is highly recommended that both the documents and the file in which they are to be found be signed.

What happens if the tender configuration in the platform requests documentation additional to those specified in the administrative specifications document?

Do not worry, this is more usual than one may think. In case it happens, a standar annex should be filled in to give an answer to the requested document. Sending will not be habilitated until all documentation is attached.

What are the advantages of filing the offer to a tender by electronic means?

For a number of months now, it is mandatory for contracting authorities registering tenders at the State Contracting Platform. Thus, all users are to send their eventual queries through the same platform. Similarly, they are to receive all official updates notices through the company account in the platform as well as via e-mail. In this way, any company can have access to relevant information.

On top of this, once the offer has been filed, you can access to your filing proof document and will know the date and time the offer was filed.

There is a user’s guide available at the State Contracting Platform. It contains indications of the different actions to be taken into account when filing an offer. You can read it here.

Advantages of relying on Clave 3 expertise

After these useful tips, remember the advantages of relying on Clave 3 expertise for this type of applications.

  • More than ten years experience in the sector filing offers to different types of public tenders. You do not have to worry and can be sure, for your peace of mind, that documentation will be filed correctly in time and form.
  • We work continually with different platforms and with direct contact with the contracting authorities. We have done so for years and keep doing now. This how our consultancy services add value to our customers.
  • We will send you notice on any open call, both for subsidies and public tenders.
How to file an electronic offer to a public tender in the State Contracting Platform2019-08-28T10:38:50+00:00

What is ROLECE?

2019-08-28T10:51:25+00:00

What is ROLECE?

If, as a company, you ever thought of or tried to apply for a public tender in Spain you must find about the Spanish State Official Register for Tenderers and Classified Companies (ROLECE, for its initials in Spanish). This is a digital certification that collects all the data and information that the public administration needs from tenderers applying for a tender procedure. Its purpose is crediting the company’s aptitude, entitlement, credit rating, ability to act,… all in a single document.

But, what are the advantages for the company? Is it mandatory? What is the procedure to register in ROLECE? These are the questions answered hereafter.

Liabilities and the consequences of not registering

To solve the doubt whether registering is mandatary or not, we must turn to the new Spanish Law on Public Sector Contracting 9/2017. Namely, to article 159.4 a), which states:

All tenderers applying for public tenders through this simplified procedure must be registered in the State Official Register for Tenderers and Classified Companies”.

This means that all companies willing to apply for a public tender must be registered in ROLECE. It is therefore a mandatory action -and not optional- to take part in simplified open and simplified fast-track procedures. In case this obligation is not met, the applicant company will be excluded from the tender

Advantages for the company

Apart from the question of its mandatory nature, registration in the Spanish State Official Register for Tenderers and Classified Companies provides a number of advantages for the organization, such as:

  • Registration is valid for the whole of Spain and is, therefore, valid for applying for a public tender in any regional administration with no further registrations.
  • It minimizes the feared and excesive bureaucratic procedures, it speeds and saves time.
  • It is transparent towards any contractor, may be a business or a final consumer.
  • It means no cost for the applicant company.

Steps to register in ROLECE

Application

Registration in ROLECE takes an electronic request through an available application form. This form must be signed with the applicant’s electronic certificate or his representative’s (either electronic personal ID card or natural person electronic certificate issued by the Spanish Mint (Fábrica Nacional de Moneda y Timbre). Documentation crediting the application for registration must also be attached.

Documentation

Initial documents

The applicant company must provide documentation accrediting its character and capacity to act: the Company’s Memorandum of Association, and also its eventual amendments (if any) to update the company’s circumstances in which the registration is applied for (such as any eventual change in the managing office or any appointment in the management team). The applicant must also accredit its registration in the Spanish Mercantile Registry (or that corresponding in case the applicant is not registered as a Spanish trading company).

Company proxy documentation

The applicant will need to provide documentation accrediting the granting of powers to contract: granting of powers deed and accreditation of being registered in the in the Spanish Mercantile Registry (or that corresponding in case the applicant is not registered as a Spanish trading company). Should this powers be revoked -or any other amendment that should affect its scope- after the application for registration in ROLECE, the applicant must then file its notarized deed, as well as its entry in the corresponding register.

Yearly accounts

Yearly accounts entry will be registered by means of an XBRL format file with the contents of the accounts delivered in the Spanish Mercantile Registry. Subsequently, the company will file the documentation accrediting its yearly accounts (with an electronic or physical document) with the proof of its delivery at the Spanish Mercantile Registry.

Certifications

The ROLECE registration electronic certificates incorporate the digital signature that authenticates them and which allows testing its own authenticity through the option “validate certificate”. This functionality confirms the certificate has not been altered after it was issued. ROLECE also allows the contracting authority staff checking the data of the entry. In this case, the information returned by ROLECE is updated to the date of the query.

Additional frequently asked questions

Does a company already classified as a public contractor have to register in ROLECE?

No, since the Advisory Board (the authority that issues the public contractors classification) makes an ex officio basic registry for the classified companies.

How can I receive the ROLECE communications?

The person concerned will receive in his/her e-mail a link to the ROLECE communications and notices. This allows a safe download of any eventual notice related to an ongoing procedure. It also works as a proof that the notice was received by the concerned person.

How can I get the registration certificate?

Managers and representatives of the registered entities -as well as the contracting authorities- can obtain telematically the registration certificates they may need. They must request them at the ROLECE e-mail. To do so, they will have to accredit their identity by means of an electronic certificate.

How long does it take the ROLECE registration procedure?

At present, the registration process takes about two months since the application is filed. It is highly recommended registering at ROLECE as soon as possible. Delays are likely to grow inasmuch as the mandatary registry deadline is drawing nearer.

 

What is ROLECE?2019-08-28T10:51:25+00:00