What is happening to small business?
20th Apr 2008
The down-turn in the economy is hitting confidence generally, but that doesn’t mean that it isn’t a good time to start, or invest in a business.
We all know about the sub-prime market difficulties in the States having reverberations across the world and how mortgages have been difficult to get. The economic uncertainties have also put many private equity deals on hold, so how does this affect the average start-up, or small business looking to grow.
First, we need to look at where these private-equity deals affect. They tend to be with larger companies (£1m plus), the smaller companies (1–49 employees), which make up 99% of UK businesses enterprises were not in any case being courted by the big private-equity firms.
These were businesses that relied on the founders own resources and if external funds were required they tended to be provided by bank loans, or support from individual Angel Investors.
Bank loans are now of course not easy to obtain, however individual private investors while being cautious are not inactive. To see why, you only have to look at the alternatives for investment. While borrowing has had interest rate rises, savers have not benefited, with banks quick to pass-on any interest rate cut to their saving accounts.
The stock market is jittery and the traditional alternative to shares, property, is going through it’s worse patch for many years.
With investment into a small business you at least have some degree of control over your own destiny. There is still the same risk as always, compounded by concerns over consumer spending, but the rewards have not diminished to the extent that the alternatives for your investment have.
Additionally, while the rate of new start-ups is likely to slightly decrease, with those less sure of themselves staying in paid employment for instance, the overall quality of new businesses is getting stronger.
Those that have determination and a well researched plan are pressing ahead, successfully establishing strong business enterprises and attracting investment for growth from individual investors.
Lawrence Gilbert
www.companypartners.com
