Don't find finance via a search engine, Lancashire businesses warned
It is all too easy for Lancashire’s small and medium-sized businesses to “go on Google at ten o’clock at night” – and end up with the wrong type of finance.
That was the warning from the boss an organisation which tries to match business owners with the funding they need to grow.
“[You can] put commercial finance into a search engine and find a range of options and some of those options are easy to access – but that does not mean it’s the right type of finance at any given time,” Philip Hargreaves, head of Access to Finance, told a meeting of the Lancashire Enterprise Partnership’s business support board.
“Inadequate or badly-timed financing is cited as a major reason for business failure – and it’s important business owners access the market through a range of trusted providers,” he added.
Access to Finance is a public-sector body which has been operating in Lancashire for more than a decade and is now part of the county’s business growth hub, Boost. It works with more than 500 potential investors and aims to step in when ‘market failure’ makes it difficult for businesses to access funding.
The meeting heard that some small businesses do not believe the cost and time involved in trying to secure finance is worth it.
“There are a lot of happy non-borrowers out there – but we need to explain to businesses why it’s not wasteful to set aside some cash to help generate their next phase of funding,” Mr. Hargreaves said.
But he warned that there is often “a lack of understanding” amongst those businesses which are seeking cash about the different types of financing available to them – namely, debt or equity. The former involves borrowing money, while the latter requires the sale of a stake in the business.
The meeting heard that there will be a push to increase equity investments through the Access to Finance scheme. Since 2015, less than 3 percent of the finance acquired has been via an equity stake, compared to more than 22 percent across all growth hubs in the North west.
In the same timeframe, the organisation has helped 117 businesses find a toatl of £20.7m in funding. More than half of that finance has gone to businesses in the retail, wholesale and manufacturing sectors.
South Ribble has seen the largest number of businesses attract finance through the scheme in the last four years – 16 – while Blackpool and Burnley have had the fewest – three. But because the aim is to correct failure in the financial markets, the numbers are not considered a reflection on the health of the small business community in different parts of the county.
Meanwhile, the meeting also heard that plans to create an “innovation board” for Lancashire need to go beyond congratulating companies on any clever concepts which they may have created – and to actually get the goods onto the market.
“We need to provide commercialisation support for our businesses,” Miranda Barker, chair of the East Lancashire Chamber of Commerce, said.
“The aim is to achieve the sales of those innovations [which are then] made, produced and sold within Lancashire and bring the revenue back into the area. It can’t just stop with a wonderful innovation and never be taken forward into manufacturing here,” she added.