Growing Appetite for Equity Finance Amongst UK SMEs

Pound coin stacks – Growing Appetite for Equity Finance Amongst UK SMEsA new report from Albion Ventures has found that UK SMEs are becoming increasingly attracted to long-term equity finance.

In 2013, just 12% of small and medium-sized businesses in the country were willing to give up equity in exchange for financial support. But, according to the latest figures, that figure has now grown to 44%, up from 34% one year ago.

The report also reveals that almost one quarter (24%) of business owners would consider a Dragons’ Den style exchange of equity for “hands-on support” from private equity, venture capital or business angels – a figure which rises to 35% amongst firms with more than five employees.

Over the same period, it is further reported that demand for traditional bank finance fell from 49% to 45%, suggesting that UK SMEs are beginning to pivot away from reliance on debt, and perhaps even banks themselves.

By sector, appetite for equity finance was strongest amongst telecoms and IT firms (52%), manufacturers (40%), and transport and distribution companies (32%).   

Patrick Reeve, managing partner at Albion Ventures, comments: “It’s a vote of confidence in the post-Brexit economy that demand for equity finance continues to grow among entrepreneurs, underlining a psychological shift from the traditional reliance on bank debt as the source of growth finance.

“What is particularly welcome is the emergence of the ‘Dragons’ Den generation’ – those under 35 who embrace an equity culture. The greater willingness of younger CEOs to use equity rather than banks to secure the funds they need suggests we’re shifting towards a more entrepreneurial model as seen in the US.”

The fourth Albion Growth Report takes its findings from interviews with 1,000 SME owners, and two further reports commissioned by Albion Ventures to YouGov, which interviewed 1,018 UK SMEs in 2015, and 1,014 in 2016.

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