Access to finance always features in the list of top concerns for growing businesses. But while debates usually focus on availability of finance, I’d argue that this has improved significantly.
The area which actually needs attention is awareness of finance – what’s out there, how the different options work, and what they might mean in practice for a business.
There really is no shortage of finance providers, from high street banks to challenger banks and digital lenders and beyond. At Cornerstone, we focus heavily on small and medium-sized enterprises (SMEs), and one of our key roles is to support businesses to navigate through these options.
Many Welsh businesses still seem to lack the ambition to scale up and grow from medium-sized enterprises into large, listed companies. The issue, I believe, isn’t necessarily the availability of finance but more the reluctance to embrace equity investment. Business owners often resist external investment because they fear losing control or dealing with perceived interference from investors.
Education and raising awareness are key to overcoming these challenges. The shift in the market has been dramatic. If you look back 25 years, mortgage brokers were almost unheard of, and the high street banks dominated. Now though, whole-of-market mortgage brokers are commonplace and people wouldn’t think twice about this approach to securing a mortgage.
A similar shift is happening in commercial finance. More than 50% of the commercial finance market is driven by specialists like commercial finance brokers. This helps businesses navigate the complex financial landscape, which is crucial as it’s simply no longer feasible for many entrepreneurs to expect their traditional bank to handle all their needs at every stage of their journey, as may have happened in years gone by.
I think it’s essential for businesses to be more aware of the resources available to them. Organisations like the Development Bank of Wales, Business Wales, and other government-backed initiatives are working hard to educate and support business owners. There are plenty of options for finance, but many businesses are unsure of how to access them. Whether it’s debt or equity finance, many entrepreneurs hold themselves back because they don’t fully understand the different financial instruments or are too afraid to take on debt or equity investments.
The fear of equity investment is common, with many business owners preferring to sell their companies early rather than take on the challenge of growing them with outside investment.
This reluctance comes from a misunderstanding of the value that equity investors can bring. It’s not a case of giving up control – equity investors can provide invaluable advice, networks, and resources that help businesses grow.
I genuinely believe that Wales has a stronger support system for start-ups compared to many other parts of the UK. However, for start-ups, especially those founders wearing many hats, the challenge is finding the right advisors early on. Most entrepreneurs turn to their accountants for advice, but often those accountants are more focused on bookkeeping than offering strategic growth advice. Choosing the right advisor, one who understands growth, is critical.
Ultimately, I think we need to continue raising awareness and providing clear navigation through the finance landscape. Whether it’s through the work of organisations like the Development Bank of Wales or commercial finance brokers, businesses need to be better informed about their options and how to access the right finance for their particular growth ambitions.
