smallbusiness.co.uk: Helping your business think big

Business angels are finding small businesses increasingly attractive investment propositions. Since the start of January the National Business Angels Network has seen its angel membership more than double.

The organisation now has 1,500 businesses looking for funding and 1,600 'wealthy individuals' seeking SME investment opportunities. The chairman Bernard Hallewell suggests this increase could be a direct result of the tax breaks targeted at investors in SMEs.

At the same time a recent European Commission report backs up this trend. Enterprises' access to finance suggests that small firms are now looking beyond their banks for alternative means of financing their growth. These include equity sales, leasing, and guaranteed loans.

The report puts this down to two factors: financial markets are providing new equity-based financing opportunities for SMEs; and European banks are moving away from low-margin lending to these SMEs.

The banks’ move to more profitable areas is driven by increased competition in the banking sector. Nevertheless, the report predicts that bank lending will remain the prime source of enterprise finance for at least the next ten years.

Such alternative sources seem quite small when considered individually, but when taken together non-bank finance "can play a significant role in fostering flexibility" during a small enterprise’s growth phase, comments the Commission.

The Commission also warns SMEs themselves to be "more open and transparent" in their dealings with banks and financial institutions if they want to make the most of these new methods of raising money. Such financiers will want a bigger say in the enterprises they back.

"This implies a major change in the entrepreneurial behaviour and culture in Europe," concludes the report.

For a copy visit the European Commission’s website at www.europa.eu.int.

To find out more about the National Business Angels Network, visit www.bestmatch.co.uk.

With thanks to Lloyds TSB Success4Business. For more news and information visit www.success4business.com .

(29/10/01)