As a result of the financial crisis, British businesses have struggled to obtain the finances needed to grow from traditional high street banks. However, it appears that a combination of improved confidence in the banking sector and a plethora of alternative lenders hitting the market have worked in favour of these companies, with a new study revealing that 75 per cent of small firms polled believed they will be able to gain access to growth funds in the next 12 months.
The research, conducted by private equity firm ECI Partners, sought the opinions of 650 businesses which are currently growing at a rate of more than 5 per cent per year. Each firm which participated earned between £5 million and £200 million in the last financial year, giving ECI a broad basis from which to form conclusions.
According to the survey 54 per cent of growing businesses believe that it will be either “easy” or “very easy” to obtain capital required for growth this year, up from only 36 per cent at this point in 2012. Furthermore, this led to increased business confidence, with 49 per cent stating the belief that their firm’s growth will be in double digits during the next 12 months.money
Partner at ECI, Charlie Johnstone, believes that the confidence expressed by leading businesses in the UK will prompt growth in smaller firms.
He said; “These are the businesses that are really driving our economy forward and creating jobs and innovation in the UK.
“Where these companies go, others will follow.”
Banks remain the first port of call for growing businesses, with 58 per cent claiming they would initially discuss their lending options with their local bank. However, hot on the heels of the banking system comes private equity funding – 57 per cent of respondents have already considered taking this route, compared with only 40 per cent this time last year.
This could potentially be the incentive required for banks to increase lending, as strong competition within the financial sector has only increased with a flood of private investors.
The survey also examined the drivers for growth, and found that 38 per cent of respondents are currently seeking funds to help with the launch of a new product or service designed to maximise revenues. A further 36 per cent are looking to take advantage of a favourable export market by launching in new countries – both in the Eurozone and further afield.
Mr Johnstone continues; “We are next to the single largest economic zone in the world, the EU.
“It’s a huge market so it’s always going to be important for us.
“But the emerging markets are going to become increasingly important for exporters, especially for certain sectors.”
With business confidence on the up for the first time since the recession hit, a feeling of optimism is certainly aiding the growth of companies across the board. However, with banks still reluctant to lend in earnest, it must be hoped that this survey does not indicate a misplaced confidence on the part of small British firms.
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