In the UK, firms defined as having yearly sales of between £10m and £250m, represent the mid-market. Although this is an area which is seeing strong growth, there are both challenges and opportunities to mid-market Britain, from the export challenge to getting heard in government.
In today’s post, we will be exploring the availability of finance for mid-market companies. This remains a critical concern. Although BBA’s SME lending data consistently shows that banks say ‘yes’ to 8 in 10 applications for finance, bank lending in UK companies is diminishing swiftly. It is contracting far faster in the UK than in Germany and France, as shown by recent figures. However, this may be due to businesses exploring alternative options including leasing finance, new speciality on-line lenders, like Funding Circle for example, or building their cash reserves to finance their operations.
In the US, the creation of online marketplaces for trading shares of private, venture capital based businesses have produced an innovative way for businesses to raise capital. SecondMarket, now known as NASDAQ Private Market after being acquired by NASDAQ in a joint venture with SharesPost, is one such platform. Using this platform, fund managers can provide liquidity to their investors, generating opportunities for new product vehicles, expanding access points to new sources of capital. Major businesses that have appeared in their earlier stages on NASDAQ Private Market include Facebook and Twitter. SharesPost, a similar platform, has completed more than 2,000 equity transactions since 2011, totalling $1 billion.
Similar platforms in the UK could provide growth companies with a much-needed avenue to generate non-bank funding. If the Government increased the scope for its Enterprise Investment Scheme this would certainly abet the situation. The Enterprise Investment Scheme provides tax relief to people buying shares in small businesses. Schemes such as these, platforms such as NASDAQ Private Market, and the innovation of the on-line, non-bank lending market, will help ensure the continued growth of Britain’s mid-market.