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SME Funding to Secure Further Growth

Client Relationship Manager David Reed explores the new wave of SME funding introduced in the UK.

The new wave of SME funding which was recently announced, offered by a partnership made up of Santander, Manchester-based venture capital firm Enterprise Ventures and the Greater Manchester Pension Fund, looks set to provide a welcome boost to smaller businesses throughout the UK. At a time when traditional routes to investment – such as the high street banks – are still proving difficult to source, alternatives such as this can be utilised to furnish the kind of business growth which any ambitious SME is bound to be keen on achieving. Whilst the funding is hugely welcome, however, it offers little more than the start of a process which has to be handled with care and diligence if the growth sought is to be achieved and, just as importantly, is to prove sustainable.

The fund itself amounts to £40m which is on offer to SMEs in all parts of the UK. In order to be eligible for a loan, the SME has to have been trading for at least 3 years and be able to show a minimum turnover of £1m and current or anticipated operating profits of at least £100,000. Once it’s been handed over, the loan, which can range from £150,000 to £1m, can be used in any way the SME concerned chooses, whether this means acquiring new premises or plant, investing in technology, purchasing stock or taking on more staff. Individual loans are tailored to the specific requirements and situation of each SME, and typically cover a period of up to 5 years.

The very act of applying for a loan from this fund indicates a readiness to take the steps needed to scale up your business. The kind of clear sighted, strategic action necessary to ensure that the money is used to generate the maximum positive impact, however, is something which can’t ever be taken for granted. Whilst handling the day to day slog and workload of simply keeping your business afloat it can be easy to lose sight of the bigger picture, but this is precisely the kind of long view which needs to be taken when seeking to maximise an opportunity of this kind. It can be all too easy to fall into the trap of seeking growth for the sake of growth, but targeting areas which fall within the remit of your wider business strategy will ensure that the growth you achieve is an organic extension of that which you’ve achieved in the past, always providing that your business strategy is clear, up to date and results oriented.

Before investing a penny of this funding take a step back from the business and prioritise the parts of the business which you, personally, clearly have to focus on. Many people in charge of SMEs find delegating difficult and this is understandable, particularly if you started as a sole trader and believe (probably correctly) that nobody else understands the minutiae of your business as clearly as you do. If you look around the people working for you and find that there’s nobody you’d feel comfortable leaving in charge of day to day issues whilst you decide how to make the most of this opportunity, however, then perhaps the wisest area of investment would be recruitment, since you’ve clearly been taking on the wrong people.

If your business doesn’t already make use of a business mentor service then this may be the moment to consider doing so. The advantages of mentoring are numerous; not only will the right mentor have been through the same kind of decision making process as you’re dealing with now, but they will also be able to take a cool and dispassionate view of the way in which your SME has been run to date. The chances are that you’d find it extremely easy to sit down and draw up a list of those things which your SME does well – after all, what you do and how you do it better than your competitors is the cornerstone of your success – but the right mentor will also be able to point out those areas in which you’re not achieving everything you could. It may not be pleasant to hear (although a good mentor will always couch any comment in the most constructive terms possible), but input of this kind may well highlight the areas most in need of investment, and an objective outsider will be far better placed to deliver it than business partners or staff members who are as emotionally involved in the business as you are. It could be that your marketing strategy needs to be revamped or outsourced to experts in the field, or perhaps past attempts at scaling have been over ambitious, rushed or under-cooked. No matter what the individual issues are, the process of drawing up, revising or simply reviewing your business strategy, whether alone or with the help of a mentor, will help to bring them into sharp focus.

Clearly, the specifics of growth creation and investment will differ from business to business. For some, it will be the chance to invest in more stock or take on more staff, whilst other will utilise this opportunity to take advantage of technological advances. Tools such as cloud storage and the automation of factors like customer support tracking can enable even a relatively small SME to act with the kind of slick professionalism which was once the preserve of bigger businesses, without sacrificing the flexibility and personalisation which form the USP of so many SMEs. For many businesses, a loan of this type will be the chance to move into new markets overseas. According to figures published by the Confederation of British Industry, only 20% of SMEs in the UK export abroad, but those which do boost their chances of survival by 11%. Whilst the most popular overseas markets are in the EU and the USA, due to the lack of language and/or trade barriers, the more ambitious SMEs will also be looking at emerging markets in newly developing economies. The rise of the internet as a business tool and the availability of legislative advice makes moving into markets of this kind easier than it’s ever been, although it is still imperative that the right amount of research is undertaken in order to establish the presence, extent and type of any demand in the chosen market.

Although the specifics may vary, the fundamentals remain constant; ask yourself whether you want to grow existing goods or services or create new ones, whether you want to concentrate on seeking out new customers or retaining and strengthening the bond you have with existing customers and whether you want to strike out into completely new markets. Put simply, ask yourself how you got where you are, where you want to go next and how you’ll be able to get there. Get the answers right (or even simply ask the questions properly) and you’ll be well placed to invest in a manner which achieves the growth you’re seeking.

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