Steven Scullion, Director, Corporate Finance
Why is access to finance so important for small businesses?
Steven is pictured speaking at our recent Access to Finance launch.
In this article, Steven Scullion, Director of Corporate Finance at Invest NI, discusses why access to finance can help micro and SMEs thrive in Northern Ireland.
Microbusinesses and small to medium-sized enterprises (SMEs) are the heart of our economy, accounting for approximately three-quarters of all private sector jobs and turnover in Northern Ireland. There are over 130,000 micro and SMEs in NI, generating annual sales worth £12.5 billion.
Small businesses often lack the financial reserves of larger ones and can find it challenging to secure funding from mainstream lenders due to being considered higher risk. Traditional lenders can also be reluctant to financially support start-up businesses due to a lack of track record and lack of assets to pledge as collateral. Without financial assistance, start-ups and small businesses can struggle to reach their full potential.
Private equity financing
Accessible finance provides an environment for businesses to thrive. It can help our small businesses innovate, grow, and contribute to industry developments.
Private equity financing is when capital is invested in companies in exchange for equity ownership. Private investors tend to invest in mature companies with good risk-return profiles and less due diligence.
Venture capital, a form of private equity financing for start-ups and small businesses with long-term growth potential, can help smaller companies through financing, technological expertise, or managerial experience.
The health of the equity finance ecosystem is vital to driving economic growth and innovative new businesses. Equity finance drives competitiveness and productivity by introducing disruptive technologies that competitors must try to match. This helps improve performance at firm and sector level.
However, Northern Ireland has longstanding under-investment in the venture capital market. The value of equity financing as an overall percentage for NI SMEs remains low compared to our counterparts in Great Britain.
But there is evidence the market is improving. We have seen more investment in recent years from public sector finance, which is addressing the funding gap.
Public sector finance can be more accessible due to the high risk and low return nature of investments.
Promoting entrepreneurship
We need to encourage more innovation-driven enterprises in Northern Ireland, where entrepreneurs are given opportunities to implement new ideas, concepts or models.
Accessible finance can help small businesses overcome barriers to develop their entrepreneurial ideas into a commercial reality.
Invest NI’s Access to Finance initiative is a portfolio of debt and equity funds designed to support start-ups, microbusinesses, and SMEs. The Access to Finance portfolio has invested over £200m in over 1,250 NI businesses since 2011 and unlocked additional private sector investment of over £400m in the supported businesses.
Many of the businesses we supported are now global brands or contributing to pioneering industry developments.
Lisburn-based healthcare company Cirdan was able to take the next step in its journey with help from the Access to Finance initiative. Cirdan set-up new offices in Australia and Canada and invested in productive development to grow the business. Cirdan has sold its software and pathology imaging into over 200 clinical laboratories across 20 countries in six continents, and at the end of last year announced it had secured £7.5 million in funding to help it scale its business across the globe.
Boatyard Distillery is another SME that benefitted from Access to Finance support. Located on the banks of Lough Erne, Boatyard Distillery is now exporting to fourteen countries around the world. Through Access to Finance funding, the team was able to grow its headcount and invest in additional resources for future growth.
Access to Finance in Northern Ireland
Invest NI is investing a further £100 million across three funds in our Access to Finance initiative over the next five to ten years.
Our contribution is expected to leverage a further £150 million in private sector co-investment, resulting in a potential total investment of more than £250 million to start-up and SME businesses across Northern Ireland.
These new funds are:
- The NI Small Business Loan Fund III, which will provide loans of up to £125k to microbusinesses, social enterprises and SMEs across NI
- Techstart III (including a £7.2m Proof of Concept Grant Fund), which will help bring innovative ideas to life to develop a portfolio of innovation-driven enterprises
- And Co-Fund III is a £39 million equity fund, which will co-invest alongside private sector investors, with a focus on early-stage businesses in priority sectors.
If you are interested in Access to Finance, contact our Business Support Team on 0800 181 4422 or visit our dedicated page to learn more.
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