RESEARCH by UK Steel Enterprise has shown that equity-backed businesses grow faster than those backed solely by loan funding.
Begins a spokesperson: “The findings come in the wake of the CBI’s call for more companies to consider equity finance when looking for investment.
“The CBI report, ‘Slice of the Pie‘, highlights the UK’s over-reliance on traditional debt finance, saying that greater use of equity finance could help more firms to invest, grow and boost the UK economy.
“UKSE has directly invested more than £22 million in tailored financial packages for almost 1,500 businesses in the steel areas of Lanarkshire, Glasgow and North Ayrshire. One of Scotland’s longest-established business support organisations, the Tata Steel subsidiary, has supported the creation of 17,000 jobs.”
Anne Clyde, regional manager for UK Steel Enterprise, said: “The report highlights that although only three per cent of growing firms use equity finance, two-thirds of those who do use it report a positive experience.
“We echo that as we have found that equity finance can work really well for small and medium sized enterprises (SMEs) as well as larger companies.
“UKSE aims to help businesses with investment and share packages up to £750,000.”
Sensing and control specialist SST Sensing (SST) benefitted from initial UK Steel Enterprise support in 2006 followed by an equity finance package that was part of a £500,000 investment into the company’s research and development plans and international expansion ambitions.
“Equity finance was the ideal route for us,” said company founder, Keith Wight.
“We feel that we have benefitted not only from having an injection of capital but also from our long-term partnership with UKSE. It is a source of valuable advice and support and also demonstrates to others that UKSE has confidence in the company.”
Following the investment, the company has developed its R&D expertise, increasing sales of its own intellectual property from 25 per cent to 80 per cent of overall trade and recently moved to its own premises at a new facility in Coatbridge.
Anne Clyde added: “Other benefits for SMEs include a strengthened balance sheet and the possibility of further expansion finance from a source with a real vested interest in the business.
“It is also a myth that using equity finance results in a loss of control. UKSE is not here to run businesses and we never take a controlling interest but we are a source of support and advice that our companies say is a real benefit.
“We would encourage companies to talk to their business advisers about equity finance as many growth projects stall when more traditional funding routes are exhausted.
“Equity funding can, quite simply, help a business do what it wants even if loan funding is not available.
“Our aim is always to tailor a financial package that is right for the individual company.”
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