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Where can a business go for investment?

It depends on what you want it for, how cash-rich the business already is and how much equity, if any, you’re prepared to give away.

We analyse the benefits of each type of investment and talk to an expert on how companies can ready themselves for growth.

Equity investment in smaller businesses surges to £14 billion

There was a surge in equity investment into smaller UK businesses last year, according to the British Business Bank’s Small Business Finance Markets 2021/22 report.

A total of £14 billion was invested during the first three quarters of 2021, a 130 per cent increase on the £6.1 billion invested over the first three quarters of 2020. With one quarter still to go when the report was published, investment had already exceeded the £8.7 billion

HOW DO BUSINESSES RAISE THE FINANCE THEY NEED TO GROW?

invested in the whole of 2020.

The report suggests there could be continued economic recovery throughout 2022, with strong demand expected for investment to fuel business growth.

Although this year may still provide a challenging environment for some businesses, many others report that they are seeking to pivot towards growth, improve productivity and transition to a net zero economy.

A lack of local investors leads to wasted economic potential

More than four in 10 businesses in the UK were using external finance in 2021 but a lack of local investors means economic potential continues to be wasted across the UK’s regions and nations, according to the British Business Bank.

London, the South-East, North-West and

East of England accounted for 86 per cent of equity investment and 69 per cent of private debt investment despite hosting just 55 per cent of UK businesses.

The UK’s uneven distribution of growth finance is not driven by a lack of high growth potential business in certain areas of the country but by the presence of local investors.

Investors are far more likely to invest in businesses close to their office – in 82 per cent of equity investment stakes between 2011 and 2020, the investor and company were within two hours of each other; 61 per cent were within one hour of each other.

Catherine Lewis La Torre, CEO of British Business Bank, said: “The lower flows of finance in certain regions reflect a population of businesses operating with fewer choices. These gaps in growth finance are undoubtedly holding back ambitious entrepreneurs and lead to wasted economic potential.