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Access to Finance Lancashire Blog: Equity funding to fuel growth

Senior Access to Finance specialist Mark Gibbons gives his view of the benefits equity funding gives to SMEs.

The Problem

Due to the COVID-19 pandemic many businesses have sought financial support to survive and, in some cases, take the opportunity to pivot and rebuild their business in order to be viable during these difficult trading conditions. However, most of the funding solutions delivered by HM Treasury have involved businesses taking on new or additional debt. The Coronavirus Business Interruption Loan Scheme (CBILS)and Coronavirus Large Business Interruption Loan Scheme (CLBILS) schemes were rolled out, followed by the Bounce Back Loan Scheme (BBLS).  This resulted in huge volumes of businesses taking on debt they perhaps wouldn’t have done. Whilst these government-backed schemes are beneficial, offering attractive terms and rates, the fact remains that the debt will continue to sit on the balance sheet with both the business and business owners being liable.

The knock-on effect for businesses is that to acquire additional debt funding may prove even more difficult as business are more highly geared and have less headroom when it comes to debt serviceability.

   

Equity - The Solution?

The Access to Finance Lancashire team has identified that this problem is yet to fully manifest itself, suggesting equity funding options to fuel growth have been overlooked. This may be due to:

  • Lack of awareness of equity options
  • Lack of understanding of the process
  • Reluctance to ‘give away’ equity and other incorrect preconceptions
  • Perceived loss of control of their business
  • Lack of understanding around correct valuations
  • The negotiation process and terms sheets and offers
  • Dragon Dens being the perceived process for equity


Equity can be used to support growth, invest in capital equipment, enable mergers and acquisition strategies.

The team can provide support in this area and dispel some of the above myths and pre-conceptions – get in contact.

 

About the author

Mark Gibbons

Mark Gibbons

Mark is the Senior Access to Finance Specialist in Lancashire and is responsible for day to day management of our Access to Finance specialists across the county.

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