Whisper it quietly but that long thought extinct breed, the equity investor, is back.
Six months ago readers probably thought I’d lost the plot (again?) when I said “Everything is awful, it’s time to be bullish”. My tried and tested reasoning was that when everyone has either mentally or physically sold out then, guess what, share prices go up. Well, that’s exactly what has happened.
The brewery or pub operator I bought into is up 30 per cent as are many other quoted SMEs. Most of the traditional commentators are, predictably, muttering it’s all a flash in the pan and bear markets will back any day now. It isn’t and they won’t.
How so? Because the psychology is turning. Investors are beginning to move from “you can’t go wrong with government bonds” to “crikey, some companies are doing okay (housebuilders, midlands automotives, restaurant chains), we’d better start thinking about equities again”.
Now, it is early days and bull markets climb a wall of worry but I suggest you need to start thinking about how to take advantage of this fundamental change in sentiment for your business. By now most SMEs will have realised that the high street banks are not for them as witnessed by the Federation of Small Businesses, which found 40 per cent of small businesses are being turned down for bank loans and hence the credit squeeze is “becoming critical”.
Those banks never did like you anyway. Even in the days of easy credit they always much preferred to lend against so called hard assets like property, as opposed to those who make something or provide a service.
As quoted equity markets continue to improve over this year it will become easier and easier for you to attract shareholders into your company. Some will want to stick with those traded on the London Stock Exchange but there will be many who are willing to invest in private companies, possibly through new mediums such as crowdfunding or platforms such as assetmatch.com. Or, with the help of knowledgeable local accounting firms (see the ICAEW website), find investors directly.
Still not convinced this merits your attention? Perhaps when you realise/point out to equity investors that, thanks to the Enterprise Investment Scheme, most of them will only have to pay 70p in the pound for their new investment you will be. I am constantly amazed how many investors and entrepreneurs there are who are not fully up to speed with the really excellent advantages there on offer through EIS.
2013 will be the year of the equity investor. Make sure you capitalise on that.
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