Is it time for smaller businesses to break from tradition?

A weekly newspaper editor once noted that the ‘family factor’ can be one of the biggest drivers when it comes to newspaper sales in Northern Ireland.

For a lot of readers, the front page story or pictures only partially influence their decision to buy a copy. Most generally, they buy the newspaper because it was the one their family always bought.

On occasion, we can certainly be traditionalists in Northern Ireland when it comes to making decisions and the same it seems is true when it comes to accessing business finance.

Last week the British Business Bank published its latest Nations and Regions Tracker which provides analysis that illuminates the geographic patterns seen in UK small business finance.

The report found that 51% of smaller businesses across Northern Ireland were using external finance in 2023, a marked increase of 13% on 2022 and second only to Wales for exceeding the UK average growth rate.

But when we drill down into what those finance forms were in Northern Ireland we start to see the lean towards core products such as credit cards and bank loans. Put simply, we fall back to the tried and tested.

Credit cards saw the largest upturn in usage, growing to 16% in 2023 from 13% in the previous year while the use of bank loans, rose one percent to 14% in 2023 when this finance type was in decline in most other parts of the UK.

While these forms of finance may be the right option for many smaller businesses across Northern Ireland, there is a growing concern that by not considering the full spectrum of options, firms here may not be unlocking their full potential.

It’s perhaps not a surprise, but Northern Ireland is underrepresented in UK equity activity.

It was in line with the rest of the UK regarding the number of equity deals per high growth enterprise (0.1) from 2021-2023, but the corresponding value of these deals was well below the UK average (0.4 vs 1.4).

According to the Bank’s report, Northern Ireland also experienced the largest decline in equity deals (-33%) among all UK nations and regions between 2022 and 2023. However, during this period, investment value fell at only half the rate of the UK's downtrend (-24% vs -48%).

Support in the equity sector is growing with more national and international investors realising the quality of Northern Ireland’s start-up and scale-up ecosystem. We have numerous start-ups, particularly in the life sciences and tech sectors who are causing a stir on the global stage.

This is evidenced by the recent Inbound Investors event. Organised by Catalyst and supported by the British Business Bank, 48 investors descended on Belfast to speak to around 50 fast-growing local firms about investments up to £10million.

The British Business Bank continues to invest heavily here with the launch of the £70million Investment Fund for Northern Ireland last November.

The fund offers a range of commercial finance options including debt finance and equity investment to support businesses from all sectors in Northern Ireland and at different growth stages.

Clarendon Fund Managers provides equity stakes in businesses up to £5million while Whiterock manages the debt fund, offering loans of £25,000 up to £2million.

It recently announced its first debt and equity deals in 2024, with loans and investment worth £100k and £750k respectively.

The support is there for smaller businesses and it’s only getting better but to realise their full potential its important business owners choose the right finance to support their growth ambitions.

With equity investment some people may struggle to get past the notion that it means giving up a share of your business, and in Northern Ireland that sometimes means a business which has been in the family for generations.

This would be a break from tradition and as we’ve already explored, something which can be a problem in Northern Ireland.

But equity investment can deliver benefits for smaller business such as providing access to finance without the burden of regular repayments which comes with debt products.

This cash can be diverted into other areas allowing your business to grow as a result.

It should also be noted that investors can often bring expertise, strategic guidance and access to networks which again can help accelerate growth.

Whether debt, equity or a hybrid version of both is the right choice for you, The British Business Bank is committed to helping you find the best choice for your business needs.

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