Equity investments in small businesses on the rise

Despite the ongoing inflationary pressures and the stunted growth during the pandemic, UK small and medium-sized businesses (SMEs) continue to see record-breaking levels of investment.

In fact, equity investment in small businesses amounted to a record £18.1 billion in 2021, with technology businesses leading this growth.  

Compared with 2020, this is an impressive increase of 88 per cent and, according to the British Business Bank’s annual Small Business Equity Tracker, this growth has continued into 2022.

Over the first three months of this year, investment amounted to £7.6 billion, which is the highest recorded level in a single quarter.

How can your business attract investment?

With investment levels on the rise, you may be wondering how your business can benefit from this.

Accessing external investment can be a great way to raise the finance you need to elevate your business.

There are many different forms of investment, and which option is best for you will depend on your overall business plan.

Here are the most common types of investors:

Traditional banking: A bank will provide your business with a loan which receives a fixed monthly return which is increased by the interest rate charged.

Angel investors:  These are usually very wealthy individuals who invest by buying their shares in exchange for convertible debt or ownership equity. This is most common for first-time businesses or start-ups.

Peer to Peer Lenders: If you do not want to use traditional sources of finance, you could opt to use a P2P lender. This is when an individual personally funds the ventures of small businesses and purchases their shares, these loans are then repaid with interest.

Personal Investor: This is an individual that invests in your company themselves, with the main aim usually to create a secure financial cushion for later years.

Venture Capitalists: If your business has high growth potential, you may attract venture capitalists. This is a form of private equity financing provided by venture capital firms or funds to start-ups, early-stage, and emerging companies.

Need advice on raising finance? Contact our team today.

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