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Equity and Alternative Finance Deals ‘Growing Strongly’ Among Small Firms

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The number and scale of equity deals and alternative finance arrangements involving small firms grew strongly over the course of 2017.

That’s according to the latest set of figures on the subject from the British Business Bank, which was established by the government in late 2014 with the aim of supporting SMEs around the country.

Equity deals involving small businesses are understood to have became much more commonplace last year as companies looked beyond traditional banking institutions in search of financial backing.

In fact, there were reportedly 12 per cent more equity deals involving small firms agreed last year than during 2016 and their collective value was reckoned to be some 79 per cent higher than in the year before.

Meanwhile, the value of asset finance deals involving SMEs increased 12 per cent on the same comparative basis and the scale of peer-to-peer lending swelled by as much as 51 per cent, the British Business Bank has said.

“A core objective of the British Business Bank is to encourage greater diversity of finance, so we welcome the growth in the uptake of equity finance and other alternatives to traditional lending,” said Keith Morgan, the CEO of the British Business Bank.

“It can’t be overstated how important it is to build a more complete funding ladder for economically important high-growth businesses no matter where they are located.”

While welcoming trends in equity finance and alternative lending to small businesses, the publically-backed bank has said it hopes to see more “long term patient capital” being deployed in support of start-up companies that could become “fast-growth businesses”.

“Such finance is a key ingredient in enabling firms to scale up and a significant economic impact could be made if availability was raised to the same level as the US,” the bank said in official statements on the subject.

It is hoped that with government support billions of pounds will eventually be allocated through the British Business Bank as “patient capital” in support of the efforts of SMEs around the country.

For now though, the bank says that small businesses are lacking in confidence about their future prospects and demand for new loans in general is relatively low.

According to the bank, 70 per cent of SMEs say they would currently be willing to forgo expansion if it meant they didn’t need to borrow, with large numbers of businesses apparently concerned that they wouldn’t be able to access loans if they were to apply for them.

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