Alternative finance is changing the landscape of small business funding and borrowing and is attracting a lot of attention from investors and borrowers alike, for good reason.
Traditional lenders have been risk averse for almost a decade and even today, as banks demonstrate more willingness to support new and growth companies, the average loan size and speed of draw down often can’t keep pace with the needs of a new business, especially those operating in the tech sector.
Some forms of alternative finance – invoice financing, asset based lending and equity based crowd-funding for example - have long since entered the mainstream. But initiatives being put in place by the Northern Powerhouse, LEPs, Growth Hubs and partnership programmes across the North West are reshaping and reinvigorating the growth potential and options of our ambitious businesses.
The result? A flexible range of finance products that is helping to close the funding gap between the North and South and delivering jobs and revenue that would otherwise simply not exist.
- For start-ups, often considered the lifeblood of the alternative finance market, the benefits can range from various free services – mentoring, banking, office use – to the more obvious such as the lower rates of interest that government backed programmes like Start Up Loans can offer.
- Larger companies will usually be looking for more guidance and input as well as finance which is where programmes like the Northern Powerhouse Investment Fund, NPIF – BFS & MSIF Microfinance become a more attractive offer. NPIF provides microloans, debt and equity investments, ranging from £25,000 to £2m to help small and medium sized businesses to start up, scale up or stay ahead, with expert business planning, support and reviews built into the life of the loan. Securing the finance is the first step; making sure it is being put to best use to ensure the growth of the business is the next.
- Services like Co Angel and North West Business Angels are aimed at early stage, high growth innovative businesses that need between £50k and £2m to develop and research their products and services and grow to the next level. Around 90% of the companies that Co works with operate in the tech sector, with over £15m currently leveraged into 20 completed deals across the North West. This service is designed not only to deliver vital funding but also to build capacity in the investment market and to increase access to deals for investors, with finance coming from syndicates of sector specific business angels. The demand for and success of the programme in the North West to date has led to Co now preparing to launch its own investment fund to meet the need of growth hungry businesses requiring early stage equity as well as supporting businesses embarking on further rounds of funding.
As well as an expanding range of options for businesses seeking investment, what the North West alternative finance landscape also offers entrepreneurs is a vital input of expertise – from advisors that work with companies to navigate their funding journey or the experience and commitment of a business Angel who has put his or her own cash on the line to make that business a success.
Entrepreneurial appetite for investment has never been higher, with our region now attracting global attention as the home of game-changing businesses and, with robust public private partnerships and the joined up working of our region’s business support systems, North West businesses now have unparalleled access to alternative finance choices, from the critical start up stage through to growth and gazelle.
Business Finance Solutions (BFS) is a leading alternative business finance provider based in Manchester city centre, supporting businesses across the North West and the UK and closing the ‘finance gap’ to ensure that businesses have access to the finance they need through a wide range of products and embedded business support.
BFS provides a range of business finance solutions including Start Up Loans, the Northern Powerhouse Investment Fund and business growth loans.
Outside the North West, BFS is a national back office provider for the Start Up Loans Scheme. The finance offering ranges from £500 through to £25k and the terms range from one to five years. To date BFS has lent over £141m to businesses across the UK and supported in excess of 17,000 businesses.
By Darren Gowling, Senior Investment Director, Co Angel Investments