The majority of business owners would rather use company profit, rather than a bank loan, to fuel future growth of their companies.
Statistics gathered by EY find that finance dominates the thoughts of entrepreneurs. Some 50 per cent revealed that access to finance is the biggest impediment to founding a new business, ahead of the fear of failure (46 per cent).
The sector identified as containing entrepreneurs struggling most to access finance is construction, while pharmaceutical business builders are at the other end of the spectrum.
EY Entrepreneur of the Year UK leader Stuart Watson says that pairing capital with business growth plans is still a ‘key area of concern’ for ambitious entrepreneurs.
‘Entrepreneurial business leaders that develop strong controls over cash and cash forecasting as the grow find this enables them to plan ear for fundraising and helps to attract investors.’
Since coming into power in 2010, the coalition government has introduced a number of business finance schemes to boost the availability of capital. Project Merlin, the Regional Growth Fund, the Funding for Lending scheme and the British Business Bank have all been created with varying degrees of success. Recent developments have seen the government move towards making it a requirement for banks to refer failed loan applications to alternative lenders.
When quizzed on what sources they were most likely to utilise to grow, 27 per cent of the 226 entrepreneurs say retained profit would be first port of call, 21 per cent banks, 16 per cent private equity, 9 per cent IPO and 3 per cent venture capital.
‘There are a wide variety of options for funding growth, incentives and tax breaks for investors,’ Watson adds, ‘However, these are often complex and take time to review.
‘For busy entrepreneurs with businesses that need day-to-day leadership, it can be invaluable to bring in a mentor, non-executive director, or an advisor, that has been through the issues before.’
Watson says that government policy has attempted to deal with the issue, but that the EY survey shows that politicians need to focus on encouraging further investment in fast-growth companies.