The old saying goes that you need to spend money to make money.  

However, accessing finance is only getting tougher as the cost of borrowing increases and banks tighten up on lending. 

Alternative methods of raising capital include looking for investment from so-called ‘angel’ investors, an individual or group of people who provide capital and advice to businesses in return for a stake.  

Michael Walby, head of corporate at Burnetts Solicitors, in Carlisle, says angel investors will usually take a minority shareholding in young or start-up businesses as well as offering expert support in some cases.  

"An angel investor would tend to be a high net worth individual who wants to put their funds into a company to generate growth and a return on their investment," says Michael.   

He says the first step towards finding investment is often to approach an accountant or business lawyer who will offer advice or even put you in touch with other clients who are looking for equity opportunities. 

"The biggest thing that business owners have to grapple with is that they will ultimately have to give up some control of their business because they're giving away a share of it in return for investment,” says Michael.  

“In Cumbria, because seeking outside equity investment is not that commonplace and their other peers aren't doing it, business owners can tend to approach outside investment with a degree of caution. 

"As a business owner you must have a good story to demonstrate why you're seeking the investment; whether it's for an investment for growth, to make bolt on acquisitions or expanding into other areas. 

“Any investor will want to know that there's a strong management team that can go on and deliver that growth.  

"We do work for a number of high net worth individuals who are prepared to look at businesses and invest. We've acted for several over the last few years who've invested in well-known businesses in the region and they've gone on to be very successful indeed, proving that angel investment is a viable route for Cumbrian businesses.” 

In Cumbria, businesses which want to work with angel investors can get help from organisations such as the Business Investors Group.  

The Business Investors Group has nine meetings a year in Cumbria and the North East, usually attracting a maximum of three pitching businesses. 

Members will often invest as a group of three or four, bringing not only their money but their skills and expertise to the table. 

David Beeby, former group chief executive of plastic film maker Innovia, based in Wigton, is one of the investors with BIG.  

He says it is vital that those looking for investment work on the three P’s of  “people, product and process”. 

"Ultimately it’s the people involved in the business that make the difference," says David.  

"There's no doubt that the key element to this whole thing is the person or the people that you are backing. 

“Secondly, it’s about what they are trying to do and whether individual investors are interested or excited about that. 

"Then how is it going to be developed? How's it going to be produced? How's it going to be sustainable? If it's manufactured, how's it going to be manufactured and have you got the skills to do that? There's always got to be a credible plan.” 

An essential part of this comes down to cash flow forecasting and business planning.  

Business owners also need to be realistic about the valuation of their business and how big a share they are willing to let investors take.  

“As a founder you have decided you need to bring some money and skills in, we certainly want you to be highly incentivised to be successful but you have to be realistic about letting some of the equity go to the investors,” says David. 

“It’s better to have 80 per cent of something rather than 100 per cent of nothing. Sometimes very high valuations can trip the whole thing up.” 

It is also important for founders to be self aware enough to understand what limitations there are to the business and themselves and what help they require to make it work.  

David says usually one of the group of angel investors from BIG will take a seat on the board of the company to help drive it forward. 

“None of us are experts at everything,” says David.  

“I think it's important that sometimes the proposers realise that there are certain areas where some help is needed. 

"Our group talks about money with expertise. It's not just about money, we've got people with all sorts of different experiences who can help and enjoy helping.” 

Another Cumbrian investor is Brian Scowcroft, who lives in the Lyth Valley, the owner of Kingmoor Park Enterprise Zone, in Carlisle.  

His investments over the years have included Kingmoor Park itself, as well as industrial sites in Stockport and Leigh.  

He also recently sold R&G Fluid Power Group, headquartered in Preston, which he invested in as a partner for five years, growing its turnover from £9m to £55m.  

Last year Brian also acquired industrial drying machine specialist Mitchell Dryers, which is based on Kingmoor Park.  

Brian’s approach to investment is to either take total control of a company or run it as a joint venture 50/50 and he is particularly interested in investing in businesses involved in the green economy.  

Like David, he says personalities are key. 

"Personality is really, really important,” he says. 

“You put the management team in place and you highly incentivise them equity wise and you let them get on with it. I lead from the rear. The team's out in front, and I can guide them as necessary.” 

A good investment also has to have clear potential to grow. 

"It has to be scaleable,” he says. 

“I like to say, unless you've decided upon a destination, it's very unlikely that you'll arrive there. If you aim for the stars you may land on the Moon. You might have failed in your overall objective but you've still succeeded. So never be afraid to fail. Always aim high.”