Enhancing the business finance ecosystem

Smaller businesses are a fundamental part of the UK economy, driving growth and employment creation.

Those businesses categorised as small and medium-sized enterprises (SMEs) employ around two thirds of the private sector workforce and generate turnover almost equal to that generated by the country’s largest businesses. Enabling their success is therefore crucial to UK economic growth.

Having access to finance, and importantly of the right type, is an essential ingredient for businesses to grow and prosper. Start-up and scale-up funding, in particular, can be critical in helping to bring innovative products to market.

There are two sides to every market – the supply side and the demand side – and regional finance markets are no different.

The supply of finance, obviously, is important, and the British Business Bank plays a role in increasing both the volume and diversity of finance in the East of England. Since we were set up in 2014 we have been involved in supporting almost £1.9bn of finance to around 5,700 smaller businesses in the region, and have increased the number of partners with whom we work to deliver such finance to over 120 – partners such as Funding Circle, Liberis and Metro Bank – helping to bring diversity and choice of both finance type and provider.

Over the same period, our subsidiary, Start Up Loans, has provided 2,365 loans across the East of England to help aspiring business people turn their dreams into reality.

There is, however, more to do. Our 2018 Small Business Finance Markets report found, for example that, while the East of England was home to 8.7% of high-growth businesses, it only accounted for 6% of all UK equity deals by number. This came despite the region having significant clusters for software and life sciences, where growth prospects can be closely aligned to the ability to attract equity capital.

As well as supply of capital, there is a general demand-side issue across the UK in that smaller businesses are often not fully aware of their finance options. British Business Bank research shows that a little more than half of smaller businesses considered only one provider when they last needed external finance. That was most often their current bank, although a bank loan might not always be the most suitable form of finance.

As the UK government’s economic development bank, we want to help smaller businesses at every stage of their business journey – from start-up to high-growth scale-up – to understand the financial landscape and, ultimately, to be able to access the right finance for them.

In addition, there is particularly low awareness and therefore demand for alternatives to traditional bank lending outside of London and the South East. Addressing these types of regional imbalances is a key objective for the British Business Bank.

That’s why we are currently putting in place a new UK Network, with dedicated regional managers and directors, and I am delighted to have been appointed as dedicated Senior Manager covering the East of England region. This new UK Network was originally announced as part of the Government’s modern Industrial Strategy in November 2017, with a remit to identify and help to reduce imbalances in access to finance for smaller businesses across the UK.

As part of the UK Network, we are aiming to enhance the business finance ecosystem in the East of England, so smaller businesses located here can grow, create jobs and prosper. Helping to raise awareness of small business finance options will be a key part of our activities, building on our existing initiatives.

The Bank has worked for some time to develop products aimed at raising small businesses’ awareness of, and confidence in, the wide range of funding options in the market. This includes the Business Finance Guide, developed and co-published with the Institute of Chartered Accountants in England & Wales, and with the support of over 20 leading business and finance organisations.

The Bank has also recently launched the Finance Hub – a new interactive website, developed with a range of industry partners and business groups and dedicated to providing independent information on finance options specifically for scale-up, high growth and potential high growth businesses to help them see what’s really possible.

Access to the right type of finance, whether that be debt or equity, opens up fantastic opportunities for businesses in any industry. The example below – supported through one of our venture capital programmes – shows how the right finance at the right time helped a local business to further success.

We also want the flow of information to be two-way – helping the Bank develop a deeper understanding of the small business finance markets in the East of England, so that, ultimately, we can improve our support to smaller businesses in the region. If you are an East of England-based funder or advisor to smaller businesses, please do get in contact with me at paul.sullivan@british-business-bank.co.uk or on 07785 234250 so we can explore further how to help smaller businesses across the region get the finance they need to grow and succeed.


How the British Business Bank is helping East Anglia-based Fluidic Analytics to grow

Here in East Anglia, Cambridge is home to a world-beating life sciences cluster, with around 430 companies ranging from tiny start-ups spawned from the university to bigger emerging leaders in the pharmaceutical industry. The cluster provides 15,500 jobs generating about £2.9bn per year for the British economy.

Based in Cambridge, Fluidic Analytics designs and manufactures special tools for protein characterisation (new techniques for studying protein structures) for applications in scientific research, clinical diagnostics and consumer healthcare.

Fluidic Analytics secured £6.8m in equity finance over two rounds from six institutional investors. Initial financing of £1.7m received from IQ Capital, via the British Business Bank’s Enterprise Capital Fund, allowed Fluid Analytics to transform their prototype products into a laboratory demo, and then to a market-ready product.

It has allowed the launch of their first model (the Flow Mk-1, released in August 2016) and to continue development of further products to bring to market. To continue to scale-up, their ambition is to secure further funding. This will allow them to create and manufacture a new generation of laboratory tools that will contribute to new scientific discoveries.

Having access to clear and impartial information on finance options is a pre-requisite for further growth. It is an essential first step in enabling a business to shop around and get the best deal, on the right kind of finance, to help them grow and succeed. What is more, it drives competition and improves the way finance markets operate for all of us.

If you are not clear on the full range of finance options available to your small business, you can learn about the many choices available at https://thebusinessfinanceguide.co.uk/ or follow the Guide on Facebook @TheBusinessFinanceGuide. If you are a business looking to grow rapidly, you can access our new Finance Hub at www.british-business-bank.co.uk/finance-hub/.

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