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Small growth firms face funding shortage


A gap is emerging in supply and demand

Smaller businesses are facing a shortage of available funding to support their growth plans, according to new research.

A majority (84%) of advisers, including accountants and lawyers, quizzed by the British Business Bank believe there are gaps in the supply of finance at all stages of company growth.

Nearly three-quarters (71%), said the demand for finance outweighs the level of supply.

Respondents said small businesses will require additional finance over the next 12-18 months because of the Covid-19 pandemic.

Anticipated demand for additional early-stage equity investment over the next 12-18 months was found to be significantly higher in Scotland (81%) than the rest of the UK (68%), while 79% also agreed that small businesses would require additional growth stage equity or venture capital.

However, Scotland’s business advisory community is significantly more likely than the UK average to say that the small business finance ecosystem offers adequate support for start-ups (63% vs. 45%) and smaller businesses surviving in uncertain times (65% vs. 48%).

Mark Sterritt, UK network director, Scotland at British Business Bank, said: “Increased borrowing during the pandemic has perhaps contributed to the rising demand for early and growth stage equity, with some businesses unlikely to be in a position to take on additional debt finance.

“That said, we have already seen a record-breaking first quarter for small business equity investment across the UK, with £90.9 million invested in Scotland as the economy recovers and investor confidence begins to pick up.”

The survey found a relatively low awareness of the equity finance and alternative finance options available, with debt finance the only finance option which respondents felt businesses were well-informed about (62%, compared to 48% for early-stage equity, 43% for growth stage equity, 38% for later stage equity and 43% for alternative finance options).

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