Finance

UK small business owners shy away from equity and fear getting into debt

Hannah Wilkinson | 26 April 2016 | 8 years ago

equity funding
Some 55 per cent of small business owners favour digging deep into their own pockets
Just two per cent of British small business owners are aiming to secure equity funding, according to new research carried out by Wesleyan Bank.

The study also revealed that owners are more likely to turn to Google than their bank manager for financial advice, while over three-quarters of British small firm leaders admitted that a fear of debt put them off seeking external finance.

Personal savings and bank overdrafts were the preferred financing options of those surveyed with some 55 per cent favouring digging deep into their own pockets.

without external finance, many small business owners are stilting their chances of prospering and fulfilling their ultimate potential. it’s only natural for small businesses to be cautious about making a financial investment, but there’s an equal risk in failing to seek support for growth, said Sean Read, Wesleyan Bank’s sales and marketing director.

the recession may have instilled a non-borrowing? culture into the mindsets of many business leaders, but now were working in a better economy, it’s time for them to broaden their horizons.

In its 2015 small business finance report, the British Business Bank predicted an uptick in the demand for equity finance from small business owners as UK economic growth continues to recover from the recession. Since 2012, the proportion of firm leaders seeking finance to provide working capital has increased, while the number looking for money to invest in new equipment has risen.

Earlier British Business Bank research found that many small business owners were wary of having to give up control over their small business to a third party making them reluctant to seek equity crowdfunding.

In one of Britain’s most well-known equity financing competitions Dragons? Den this reluctance is borne out frequently. The average amount of equity given up by entrepreneurs who come out of the contest successful is 40 per cent though contestants typically start the negotiation offering a smaller share of their company, and many have walked away from deals which involve giving up too much financial control.

The teenage founders of RKA Records were notable exception to this unwillingness. The pair gave up 79 per cent of their company in return for 50, 000 from Duncan Bannatyne.

Are you thinking about selling equity in your business? Make sure you know how to make the most of it.

Topic

Finance

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