Breaking the finance barrier

March 31, 2020

Jon Symonds, Scaleup North East partner at RTC North, identifies some of the issues SMEs face when looking to grow

By working with businesses every day, it is clear to me that we have an SME sector that is making a significant contribution to the economy of the region through growth and scale.

Growing and, in particular, scaling a business is no easy matter. Scaling creates risk, so inexperienced business leaders constantly battle with the day-to-day challenges this brings.

One of the most common challenges that these businesses encounter is cash. Access to finance is often required to fund growth or indeed smash through that ‘glass ceiling plateau’ they may have hit.

It is not unusual to sit with directors and owners of SMEs who cite the lack of finance as holding back their expansion plans and preventing them from taking full advantage of the opportunities that exist in the sectors in which they operate.

Rarely has there been more opportunity and focus by lenders and investors for business leaders to obtain the finance they require to take that next step. Yet difficulty accessing finance is a constant challenge and a recurring reason highlighted by business leaders as to why they cannot grow.

I have worked with many SMEs and have found barriers to finance often occur because and one of the following reasons:

• Shareholders, owners and/or directors’ reluctance to give away equity in their business or they have a fear of taking on debt.
• Shareholders and directors not being aligned in their appetite for risk and reward.
• A significant lack of awareness as to the range of funding options available to them. There can also be negative perceptions of how they work, what the impact is and the requirements on the business.
• A lack of knowledge in revenue, capital and other grant-funded schemes offered through funders, providers, councils and universities
• Poor internal process, controls or business understanding to give investors or lenders the confidence to deal with them –that can become very apparent in their applications
• An inability to afford to pay for specialist advisors to assist them in putting an application together
• No tangible assets to offer as security
• Applications are made for the wrong reasons

Meanwhile, financial institutions and funders themselves, and the way in which they evaluate applications, along with the inconsistency we see in decision-making, can cause further barriers. The reluctance to invest from growth funds specifically designed to stimulate and grow the SME market can be frustrating too.

Growing SMEs, and in particular scaling businesses, are critical to the long-term growth and economic prosperity of the region. Many of these businesses will become the large businesses of tomorrow.

At RTC North, the onus is to provide businesses with clear and concise information, educate business owners and give them the tools, information and assistance to make informed decisions that ultimately will lead to them growing their businesses, creating job opportunities and contributing to the region’s economy.

RTC North

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