UK SMEs Now Better Placed To Make The Right Financial Choices

According to the British Business Bank’s report titled 2019 Small Business Finance Markets, awareness of finance options outside of traditional lending continued to grow in 2018. The report highlights that 52% of small businesses in the UK are aware of peer-to-peer lending, 70% aware of crowdfunding platforms and 69% aware of Venture Capital (up from 47%, 60% and 62% respectively in the previous year).

The authors note that this increased awareness of options will be important in ensuring smaller businesses are better placed to make the right financial choices as uncertainty diminishes and confidence returns.

The UK equity ecosystem has developed over the last decade and is now better able to support businesses at all stages of their development, from start-up to unicorn, according to the report. Equity finance is supporting the development of the technology sectors of tomorrow, which are vital for the future industrial success of the UK.

In terms of crowdfunding, and mentioned as part of the wider report, the British Business Bank’s 2018 Equity Tracker report identifies that the number of crowdfunding deals recovered in 2017 following the decline seen in 2016. There were 287 crowdfunding deals completed in Q1 to Q3 2018, a 17% increase relative to the same quarters in 2017. Assuming the current trend continues, the 2018 Equity Tracker report forecasts that the number of crowdfunding deals is set to reach its highest level in 2018.

Historically, crowdfunding platforms have focused on funding seed stage companies with over 80% of their deals in companies at the seed stage in 2013, but the proportion of crowdfunding deals at the seed stage has shown a long-term decline (Figure B.38). While most crowdfunding deals are still in seed stage companies, with 57% of deals at the seed stage in Q1 to Q3 2018, crowdfunding platforms are now increasingly being used to fund larger deals in more developed companies.

This wider spread of deals across businesses at different stages is a result of crowdfunding maturing as an industry. The report highlights that crowdfunding platforms continue to be an important source of funding for early-stage companies and were involved in 36% of all seed-stage deals in Q1 to Q3 2018.