Small firms continue to utilise equity finance

The use of equity finance among small firms has more than doubled over the past 3 years, according to a report by the British Business Bank.

Equity financing is the process of selling an ownership interest in a business in order to generate funds.

The Bank's report suggests that this method of raising finance is becoming increasingly popular among the UK's small business community. According to its findings, the number of deals rose 170% in the first 3 quarters of 2014 compared to the same period in 2011.

However, the Bank also discovered notable gaps in the availability of equity finance, and has made a number of commitments to strengthen the market:

  • the Bank will put £400 million of new funding into venture capital over the next 3 years
  • it will produce a 'tracker' that will inform businesses of activity in the equity finance market
  • it will create £100 million in 'growth loans' for promising businesses under the government's new 'Help to Grow' scheme.

Keith Morgan, chief executive of the British Business Bank, said:

"Equity and other types of growth finance are a small but disproportionately important part of the UK economic landscape. As confidence among smaller businesses strengthens, the British Business Bank is committed to increasing the supply of finance to help these businesses grow."

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