#11 British Business Bank and SME Financing

This blog covers The British Business Bank and a fantastic conversation with a Senior Manager where we covered SME financing, filtering out Angels and regional disparities.

In this blog, I will be covering the brilliant work that The British Business Bank has been conducting throughout The Midlands through the Midlands Engine Investment Fund (MEIF) and their SME funding programs, how Angels could be filtered to ensure SMEs get the most out of their value and regional disparities in funding. This was fueled through my own research and a brilliant conversation with Lewis Stringer, a Senior Manager at The British Business Bank with a track record of supporting SMEs throughout The Midlands.

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The British Business Bank

The British Business Bank is a government-owned entity which aims to make finance markets work for SMEs. BBB provides a host of different funding options, as well as a plethora of resources, programs and networks which are all aimed at making SME financing easier to access and understand.

The three main things that I like/find interesting about BBB:

  1. They publish a number of reports such as Small Business Finance Markets Report 2020 and Alone Together, Entrepreneurship and diversity in the UK, which really shine light onto the trends and founder perspectives which help fuel my own thoughts.

  2. BBB has a UK-wide focus, meaning they have a great perspective on how the supply and demand of financing vary, as well as some possible solutions to solve the connection between the two.

  3. The BBB always seem extremely open and willing to speak to people such as myself about the work they’re doing throughout the UK. Lewis was actually recommended to me by 2 separate people and was one of 3 people I spoke to at the Bank.

SME Financing

The British Business Bank is simply a gold mine for information about the trends within SME financing as well as how things are expected to change within the upcoming years beyond Brexit and COVID. The below image shows interesting insight on how SMEs view financing options from Small Business Finance Markets Report 2019/2020 which analysed the 5.9 million SMEs in the UK.

When discussing these trends, Lewis and I spoke about the low finance uptake in The Midlands, which currently is the 11th ranking region in the UK in terms of finance uptake. Lewis concluded that this is primarily due to there not being the expertise from the SME side in order to know where to go and how to access all of the different finance options. BBB is working hard to combat this through pumping informative content out to SMEs, however, with Small businesses remaining reluctant to use finance (1), BBB is facing an uphill battle. However, a recent early assessment report for MEIF has spotlighted its impact in improving the delivery of equity finance in the Midlands after supporting 20% of all equity deals in the region.

Regional Disparities

One really interesting finding from Alone Together, Entrepreneurship and Diversity, was that being outside Greater London could actually be more beneficial for many startups and founders. The research found that entrepreneurs in the South East and North East see the most success, with entrepreneurs in Greater London facing the most significant challenges. This lower levels of success for entrepreneurs in London presents a paradox, but competition is one factor that helps explain this, with the below snippet elaborating on this point.

This research was extremely interesting to me, as it shows for the average person, founding a startup in London is the most challenging region in the whole of the UK due to high competition rates and demographic factors.

Funnelling Angels?

To finish off this blog I wanted to present an interesting perspective from Lewis about how being able to funnel/filter Angel investors might be extremely beneficial for early-stage founders. This is because you typically find that Angels with shallower pockets are often in the business for the networking opportunities and to keep them busy post-exit, rather than for the success of early-stage startups. Furthermore, angels will often invest in smaller amounts and tend to be local, meaning they aren’t always best in terms of total capital and network they bring to the table, so being about the funnel/filter these out could massively help.

Final thoughts…

Thank you very much for Lewis for entertaining this conversation, and apologies for taking such a long time to write it up!

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