Graeme Fisher: Managing Director for Communications and Policy at British Business Bank
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 the finance, and importantly of the right type, is an essential ingredient for these businesses to grow and prosper. In the fields of bioscience and research, start-up and scale-up funding in particular can be critical to bring innovative products to market.
However, according to British Business Bank research, their growth ambitions often aren’t realised because the financial landscape is complex, daunting and misunderstood. That is reflected in the findings of our research. The Bank’s 2018 Small Business Finance Markets report found reluctance to seek external finance. Less than half (43%) were confident they would get a loan if they applied – even though most new loan applications (72%) are approved – and over the last ten quarters, only 1.7% of smaller businesses sought new loans, a record low. Perhaps most strikingly, 70% of SMEs said they were willing to forgo growth rather than borrow.
Part of the underlying cause of these figures is that businesses are often unaware of the increasing range of finance options available to them. Just over half of smaller businesses considered only one provider when they last needed external finance – most often their current bank, although a bank loan might not always be the most suitable form of finance.
Furthermore, over a quarter of businesses that did not get the finance they were looking for put their plans on hold or gave up altogether, meaning lost opportunities to create jobs, grow their business, increase their productivity and, ultimately, grow the UK economy.
British Business Bank, the Government owned economic development bank, was established in 2014 to help make finance markets work better for these businesses. We want to help smaller businesses understand the financial landscape and ultimately access the right finance for their growth potential. Because we see this as core to our mission, we have a specific objective to help meet that need.
That’s why the Bank has launched the Finance Hub – a new interactive website, developed with a range of industry partners and business groups, dedicated to providing independent information on finance options for scale-up, high growth and potential high growth businesses to help them see what’s really possible.
We also continue to work with the industry to provide clear information through resources such as our Business Finance Guide, which we developed with the ICAEW and 21 leading business organisations. Available from the Bank in hardcopy and as an online tool, it allows small businesses to easily navigate the range of finance options available.
As well as raising awareness of the increasing range of finance options on the market, we are committed to diversifying the range of providers in the market thereby creating greater competition and choice. Greater choice for small businesses enables them to find the right finance for them to grow and succeed. We know that when we support a small business finance product or help an alternative provider, smaller businesses benefit from better choices and better terms that increased competition can deliver. This is why one of our stated aims is that more than 75% of our stock is delivered through providers outside the ‘Big Four’ banks – and we have exceeded this target for four consecutive years.
Access to the right type of finance, whether that be debt or equity, opens up fantastic opportunities for businesses in any industry, and we are currently supporting finance to nearly 75,000 businesses across a range of sectors.
The examples below that we have supported through our programmes show how the right finance at the right time helped businesses operating in the fields of bioscience and research to further success:
Fluidic Analytics
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 Fluidic 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.
Olberon Medical Innovation
Another great example is Nottingham-based Olberon Medical Innovation. Dr Arash Bakhtyari, a practicing doctor for 25 years, founded the company after he recognised the need for specialist medical devices that would improve intravenous accessibility and help with ear and nose procedures.
The business received a loan from Enterprise Loans, part of British Business Bank’s Midlands Engine Investment Fund, to support the manufacturing of their new Vacuderm™ – a single-use tourniquet which helps inflate the vein in cases where access is difficult – enabling them to go to market.
The funding has enabled the company to send samples to distributors worldwide. They now have 25 distributors on board to bring their products into hospitals.
Having access to clear and impartial information on finance options is a pre-requisite for ensuring that businesses obtain the right finance for their business needs. It is an essential first step in enabling them 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 www.thebusinessfinanceguide.co.uk/bbb 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
