MANY have found times difficult financially in the current economic climate, and raising funds to prevent escalating cash flow problems can be tricky.

This applies to companies and individuals alike. So, what course of action do you take if, during the boom years, you have failed to save enough money to see you through the worst of a recession?

Well, as an individual, you could approach a bank for a lending facility in the hope that things turn around quickly; as a company you could also approach a bank for a lending facility in the hope that things would turn around quickly; and, as an MP, you submit a few expense claims to have your moat cleaned and hope the papers do not find out about it.

For companies, however, there are other ways of raising finance without the need to borrow from financial institutions, and even without the need to repay the money.

Raising funds through issuing equity has proven to be a hit among UK companies over the past year, with the likes of HSBC, Lloyds Banking Group, Taylor Wimpey and Premier Foods to name a few, all announcing they are raising capital through the issue of new shares.

The question for investors is, however, which of the many rights issues, open offers or share placings do you take up, if at all?

Most of the new issues are offered at substantial discounts to the underlying company’s share price in order to encourage as many investors as possible to take up the new shares and, in the case of Lloyds Banking Group, try to prevent the Government taking an even larger stake in the bank.

This is fairly good news for those who can afford to take up the new shares, as they offer the opportunity to purchase more shares with no dealing costs and at a lower price than they would pay in the market.

However, it is not always quite so simple, as anyone who took up the deeply discounted shares in Royal Bank of Scotland at 200p a year ago will tell you.

Should you choose not to take up the new shares being issued, because this is done on a pro-rata basis, it will lead to your percentage holding in the company being diluted.

However, it is not only individuals and companies who are struggling to make ends meet in the current climate – many governments are, too.

The problems in the Icelandic and Irish economies have been welldocumented in recent months, but the quickening pace of increasing public debt in the UK has caused ratings agency Standard and Poors to amend its outlook for the UK from stable to negative, which will come as a blow to the Chancellor, Alastair Darling, and the Prime Minister, Gordon Brown, especially after they proclaimed to have “saved the world” with their inspiring leadership and financial prowess.

However, it should be borne in mind that this is the very same ratings agency that attached the much coveted AAA rating to many banks not too long ago.

As Government borrowing continues to rise, for both the general public and for companies, the probability of tax increases in the future is growing with every passing day.

So, when assessing which company is the most deserving of more of your hard-earned cash, make sure it is the right issue for you.

■ Wayne Berry is an investment manager in the Teesside office of Brewin Dolphin, and can be contacted on 0845-213-1340. All prices quoted in the article are from public sources. The views expressed are not necessarily held throughout the Brewin Dolphin Group. You should bear in mind that no investment is suitable for all circumstances and it is important to seek expert advice if in any doubt.

Brewin Dolphin Limited is a member of the London Stock Exchange, authorised and regulated by the Financial Services Authority.