Firms need to understand the variety of finance choices available

Marcus Stuttard, Head of AIM, London Stock Exchange

​C​apital is the fuel on which businesses run. And whilst there is rightly much focus on increasing sources of funding for fast growing businesses, what is sometimes overlooked is that for many companies a key concern is lack of available information on how to scale up and where to find unbiased guidance about the different sources of finance.

Only last week, The British Business Bank identified in its 2018 Small Business Finance Markets Report that often companies either aren’t aware of or don’t understand the variety of finance choices available to them.

To try and address this gap, in 2014, we launched ELITE in the UK, a business support and capital raising programme for high growth private businesses. Through the programme, businesses receive practical knowledge about the different sources of growth capital, be that venture capital, private or public equity. ELITE now supports over 700 firms globally, including more than 100 in the UK – of which five are Yorkshire-based.

But ELITE is just one of the many ways in which London Stock Exchange Group supports growing companies. Since 1995, more than 3,800 companies have begun life as a publically-listed company on our unique growth market, AIM. It has provided vital growth finance, close to £110bn, for thousands of ambitious businesses. As a result, the many founders and entrepreneurs behind these ambitious businesses have been able to realise the potential in their firms.

Going public is a milestone in any company’s evolution and development and it is a considered decision that will ultimately transform the future of a business. To capture some of the stories of founders and entrepreneurs in their journeys up to and onto AIM, we published earlier this month our AIM Guide for Entrepreneurs.

What is clear is that an IPO means something different for everyone. For some founders, raising capital is their primary reason for joining the market, whilst for others it is about expanding their shareholder base or accessing a secondary market for their shares. There are entrepreneurs that seek a partial or significant exit and others that come to the market to maintain control over the direction and future growth of their company with the support of a wide set of investors.

What’s more, in having a greater understanding of the variety of sources of capital available to them, company management teams are better equipped to access long-term equity capital. This is something we have long campaigned for as group, together with the wider business community.

Debt is perfectly suitable (and tax deductible) for larger, established companies to manage their obligations but it is often unsuitable for high-growth, dynamic firms which seek to prioritise innovation and growth ahead of servicing a loan.

The signs are encouraging. Long-term capital providers are increasingly supporting each other across the equity funding ladder, from angel finance to venture capital and crowdfunding through to public markets like AIM.

This was reflected in The British Business Bank’s 2018 Small Business Finance Markets Report. It revealed that equity and alternative finance is growing strongly in the UK. There were significant increases in 2017 in both the value and number of SME equity deals, up 79 per cent and 12 per cent respectively.

But the report found that more still needs to be done. More UK start-ups could become fast-growth businesses with greater availability of long-term equity capital.

Together with Government and business, LSEG is committed to empowering our most exciting small and medium sized business. In large part that means giving these companies the information and access to patient equity capital that will provide them with a permanent foundation for long term growth.

And along the way, we look forward to welcoming the next generation of entrepreneurs and founders to the UK equity markets too.

Read the stories of some of AIM’s ambitious entrepreneurs in the AIM Guide for Entrepreneurs:

Read the British Business Bank’s 2018 Small Business Finance Markets Report:

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