Small Scottish businesses are likely to struggle to access the level of finance and investment needed to support growth, with a perceived gap between the supply and demand for finance.
That’s according to research from the British Business Bank and Ipsos MORI, which found that 84% of accountants, lawyers and corporate finance advisors surveyed believe there are gaps in the supply of financing at all stages of the company’s growth and development.
Almost three-quarters (71%) said the demand for finance outweighs the level of supply.
Respondents also said small businesses in general will need additional funding over the next 12 to 18 months due to the pandemic.
Of those polled, 86% in Scotland said small businesses would need additional debt financing and 79% said the same about growing equity or venture capital.
The anticipated demand for additional early stage equity investments over the next 12-18 months was found to be significantly higher in Scotland (81%) than in the rest of the UK (68%).
Another 79% also agreed that small businesses would need additional equity or venture capital in the growth phase due to Covid-19.
The Scottish business advisory community, however, is much more likely than the UK average to say that the local small business finance ecosystem provides adequate support for start-ups (63% vs. 45%) and small businesses that survive in period of uncertainty (65% vs. 48%).
Mark Sterritt, UK Network Director for Scotland at the British Business Bank, said: “Over the past 18 months, we’ve witnessed the importance of supporting small businesses, and it’s no surprise to see an anticipated need for additional funding to support their continued recovery.
“The increase in borrowing during the pandemic may have contributed to the growing demand for early stage equity and growth, as some companies are unlikely to be able to secure additional debt financing.
“Having said that, we have already had a record first quarter for small business equity investment across the UK, with £ 90.9million invested in Scotland as the economy recovers and confidence investors are starting to recover. “
Overall, respondents felt that Scottish small businesses were relatively unfamiliar with the equity financing and alternative financing options available to them, with debt financing being the only financing option that respondents felt companies were well informed – 62% vs. 48% for early stage equity, 43% for growth stage equity, 38% for later stage equity and 43% for alternative financing options .
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