Finance · 14 December 2016

Interest in equity finance soars as entrepreneurs lose faith in banks

Equity crowdfunding
More small UK business owners considered taking equity finance in 2016 than ever before

The appetite of small UK business owners for equity-based finance has increased significantly this year, while traditional bank lending has fallen, new data has revealed.

According to the year-end report from Albion Ventures, one of the country’s largest venture capitalists, around 45 per cent of owners at smaller businesses considered taking equity finance in 2016, up from 34 per cent a year ago.

Taking into account the views of owners from over 1,000 of Britain’s fastest growing companies, the report’s findings suggested small firms are increasingly moving away from a reliance on bank debt to fund growth.

This jump in interest follows the exponential growth in popularity of equity-based finance amongst small businesses in the last few years. According to the report, in 2013 just 12 per cent of UK owners were willing to swap equity for financial support.

London-based small company owners are more likely to consider equity-backed investment than in other UK regions, while millennial entrepreneurs are the demographic most likely to consider swapping a stake in their new business for funding.

Male business owners are more likely to consider equity-based finance with 28 per cent seeking venture capital, private equity or angel investment this year, compared with 16 per cent of their female counterparts.

Commenting on the findings, Albion Ventures managing partner Patrick Reeve welcomed the emergence of what he called the “Dragon’s Den generation” – those entrepreneurs under 35 years-old who embrace “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,” he added.

In Britain, small business owners are increasingly citing a lack of appropriate advice from banks as a reason not to apply for traditional loans. Recent research from banking group Close Brothers found that just a fifth of owners felt they were getting the correct advice from their bank for their business.

Millions fund startups of friends and family despite perceived risks to relationships

Sign up to our newsletter to get the latest from Business Advice.


 
TAGS:

ABOUT THE EXPERT

Fred Heritage is deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London. He previously worked as a reporter at Global Trade Review magazine.

Q&A

If you’ve found the article above useful, but have a more detailed and bespoke question, then please feel free to submit a query to our expert. We at Business Advice will get in contact with them on your behalf and arrange for a personalised response. These questions and answers will then be collated on the site for any other readers who have similar queries.

Ask a question

On the up