Britain’s small businesses, particularly in the tech sector, proved an attractive proposition in 2021, with equity investment hitting a record £18.1 billion.
The figure, an increase of 88 per cent, was almost double that of COVID-affected 2020, with a total of 2,616 deals.
The boom continued into the first quarter of 2022 with investment of £7.6 billion, which in itself is the highest recorded in a single quarter, according to the British Business Bank’s annual Small Business Equity Tracker.
Investment in UK tech companies, a driving force for the economy, doubled, rising to £8.2 billion in 2021 and up from £4.1bn the previous year.
The report added that investment in the sector is crucial for building the future economy and strengthening its position as a tech hub in Europe.
Here, BJ Chong, a Director with Palmers who specialises in corporate finance, outlines the main investment options for businesses seeking additional finance:
Traditional banking: Banks provide loans and other financial facilities for which it will charge interest and fees
Angel investors: These are usually very wealthy individuals who invest primarily in first-time business companies and start-ups by buying their shares in exchange for convertible debt or ownership equity. Capital growth and exit planning tends to characterise their approach
Peer to Peer Lenders: P2P lenders often personally fund the ventures of small businesses and purchase their shares. The lender receives interest and gets the money back when the loan is repaid. It’s a way for borrowers to get alternative funding where traditional funders are not amenable or unavailable.
Personal Investor: As the name implies, a personal investor invests in a business opportunity. Investment may be a simple loan but is often secured or perhaps involves an acquisition of equity.
Venture Capitalists: This is a form of private equity financing provided by venture capital firms or funds to start-ups, early-stage, and emerging companies thought to have high growth potential or have demonstrated high growth. Again, capital growth and exit planning will tend to be a feature here.
For more information on the various legal structures and agreements used for investing in your business, please get in touch with our expert team.