Growth back on the agenda in Lancashire
Andy Gregory, regional director at Business Growth Fund, comments on how the government’s Small Business bill is good news for SMEs in Lancashire.
Growth is back on the agenda for many small- and medium sized businesses in Lancashire, especially in areas such as advanced manufacturing, creative and digital industries, and business services. Look at Lancashire Business View’s Hot 100 Index: the combined revenues of the region’s top 100 SMEs reached £1.5bn in 2013, almost double that of 2007.
But before we get carried away by some macro-economic trends, let’s not forget the very real challenges that are still facing many individual businesses as they look to put their own growth plans into action.
Still top of the list for many entrepreneurs is finance. For most business owners, bank debt has been the only source of funding they have ever used, but the world has changed and the answer is no longer so simple. Debt will never again be as easily or readily available to businesses that want to take on additional risk. This means that ambitious companies will either have to put their growth ambitions back on hold or, more promisingly, look for funding elsewhere.
The Small Business, Enterprise and Employment Bill, which is making its way through Parliament, should help.
Due to come into effect before next year’s General Election, the bill includes measures to improve access to finance and limit red tape. Importantly, according to one measure, if a bank is unable to increase its lending facility to a company, it must refer that business to alternative providers.
It is not just the obligation to advise that’s important here - many of the management teams we speak to are already referred to BGF by their banks. More than this, it reflects a renewed interest among the business community in equity partnerships and, specifically, growth capital.
Growth capital investors, like BGF, buy a minority stake in a business and take a calculated risk on its future. They gain from shared success with management and theirs is a vote of confidence in an entrepreneur’s own ability to build a stronger, more valuable business. That is not to say they don’t help or apply pressure. A good growth capital investor is patient, investing for the long-term, and brings with them access to networks, guidance and other support.
However despite all that it offers, it is a fact that still relatively few businesses that could benefit from growth capital are taking advantage of its availability. This, in part, is due to lingering misconceptions about equity investors and also a lack of more widespread awareness of equity compared to debt.
The biggest positive of the new bill is that it will, if passed, provide even more encouragement to small businesses to consider their funding options, beyond bank debt. This can only be a good thing for the prospects of businesses in Lancashire.