When small and medium-sized enterprises (SMEs) consider their funding options, approaching private equity and development capital houses is possibly not the first item on their list.

Some probably think their firms are simply too small as they read in the media of multi-billion pound private equity deals.

Others may be worried that the fierce focus on profitability that is the supposed hallmark of private equity firms may be too tough a medicine for their companies to swallow.  However, these and other myths are just that – myths.

One concern for SME senior management is that private equity firms will dominate their boards if they become significant investors.

It’s true that typically private equity firms may want to appoint a representative on the board, just as any institutional investor would want to monitor their investment.

But they also look to strengthen boards with the agreement of management, usually through the appointment of high-calibre non-executive directors who bring some added skills or experience.

Another fear is that private equity firms use too much debt. But deals in the mid-market have always been done at a fraction of the gearing levels of larger deals. Also, across Europe last year deals were structured on a 67 per cent/33 per cent average gearing level, which was the lowest for a decade.

A further myth is that private equity houses are overly focused on cutting costs and staff.

In today’s tough business environment bearing down on costs is something that most SME CEOs would applaud. And what is important to remember is that any operational improvements or efficiency drives are part of an overall strategy, which are implemented by experts.

Some SMEs also see as a negative that private equity firms usually target an exit, typically within three to five years. But this can often bring a much-needed greater discipline and focus on profitability within a company.

And the fact that companies within private equity portfolios are sometimes sold on to other private equity firms need not be a bad thing either, as it often brings a refreshed approach and a different perspective on a company’s strategy.

Lastly, I would say SMEs should not be put off by the sometimes unflattering media image of private equity houses.

Private equity firms primarily exist to help companies grow and prosper because their profit outlook is only as good as the profit outlook of their portfolio companies.