Creation of hubs can open finance access for tech firms

The bank has launched the High Growth fund to offer more financing to tech businesses, which historically struggle due to a lack of tangible assets as security.

High growth businesses are also more likely to want to invest a lot of their free cash flow back into the business rather than focusing on repaying debt.

It can also be difficult for high growth businesses to project future incomes and many don’t have a track record to attract traditional bank financing.

Charles Shepherd, technology, media and telecoms relationship director at Barclays, told The Yorkshire Post: “If you go to London you’ve got hubs and local ecosystems, so you might have an accelerator with an angel investing network that may have syndicates to invest in these businesses.

“When you start looking around the Yorkshire area that doesn’t exist to a large extent. A lot of the cities tend to be quite guarded and unwilling to work with each other.

“You don’t necessarily have established angel networks in Yorkshire. There’s no central focus point for that ecosystem.”

Mr Shepherd, though, added that this was changing with the launch of TechNorth in Leeds and the success of Dotforge.

Alastair Watson, West and North Yorkshire director at Barclays, said: “Once the hub starts it gains momentum incredibly quickly. What we’re trying to look at is how do you replicate some of those things that are going on in London.”

With the fund Barclays is offering to allow high growth businesses to run debt alongside investment, therefore mitigating some of the risks that are traditionally attached to technology business. Helping firms to preserve more of the equity while providing short term access to finance would help. Mr Shepherd said: “The overall view is that because we’re looking to lend to businesses that have attracted third party investment, we’re in effect already lending to businesses that already have a value attached to them.

“The hope would be that if a business ran into difficulty it would be sold and we wouldn’t lose as much.”

The Barclays High Growth fund was piloted in 2014 and was rolled out in 2015. Around ten relationship directors are working on the fund.