2018 has started strongly. Global economic growth is edging up to 3.1 per cent, and the UK is poised to offset the impact of last year’s Brexit vote, as strong global performance creates prime conditions for British exporters.
SMEs are responsible for the largest share of employment opportunities in most economies — over 90 per cent in some countries – and for the global economy to keep performing strongly, it’s crucial that these firms do well.
However, too often access to finance can be a stumbling block for ambitious SMEs who might be eager to grow and expand their operations overseas, but don’t yet have the credit history to meet big bank requirements.
Handily, crowdfunding, and the rise of alternative finance more generally, has opened the door to investment for thousands of businesses who may not have been a perfect fit for traditional lenders.
Today, businesses with global ambitions, like Monzo, Brewdog and Revolut, have raised millions through crowdfunding, allowing them to expand their operations and to build deeper relationships with their customers.
Arguably, crowdfunding has ignited unprecedented change in the alternative finance landscape and raised the bar when it comes to product or service innovation and the resulting appetite from consumers.
However, raising capital through a crowdfunding campaign is only half the battle. The challenge afterwards is turning that injection of cash into a sustainable business.
Post-crowdfunding, businesses can feel fatigued, unsupported, and unsure of how to execute their long-term growth plans. And managing cash flow and working capital can be the difference between a long-term success and a flash in the pan.
The question is, what options are there to help crowdfunded businesses execute their long-term growth plans?
Focus on exports
International sales should be a core consideration for SMEs seeking fast-growth, yet time and again we hear small business owners unsure of how to adopt an export strategy.
We are in prime market conditions for exporting: the figures speak for themselves, as the top 100 fastest-growing SMEs in the UK increased their overseas sales by an average of 72 per cent a year over two years.
For these companies, exporting can safeguard against domestic uncertainty and offset declining sales. As the UK prepares to exit from the EU, ambitious companies are beginning to trade with new territories around the world, even going so far as setting up offices in big markets like the US.
However, expanding operations at this level can lead to a greater need for working capital to manage overheads and fixed costs, such as payroll and rent.
Many businesses learn at this stage that deploying crowdfunding capital is one thing, but that ongoing management of working capital can be a very different test. It’s been demonstrated that SMEs think banks could do more to support businesses.
Now, more and more growing businesses are turning to alternative finance providers such as Growth Street, to help manage their working capital and cash flow, while traditional lenders fail to offer tailored solutions or to provide enough guidance for those with ambitions to grow international sales.
This problem is beginning to be recognised by the UK government, and we are beginning to see more initiatives born to provide information and funding for SMEs.
However, awareness of what is available is still low, and the abundance of SMEs needing a sustained flow of working capital will require more than public funding in order to fulfil their potential.
As we move through 2018, market conditions could present exciting opportunities for SMEs with bold ambitions and plans for growth.
By and large, the UK’s economy is performing well in response to the political upheavals we’ve seen over the last couple of years. The rise of crowdfunding as a source of capital for growing businesses is just one example of the ingenuity and innovation we’re seeing in all kinds of sectors.
Alternative finance providers should be seen as a complementary channel to crowdfunding, providing a tailored, long-term solution for businesses with increasing working capital requirements.
Seeing the conversations being had with ambitious businesses over the last couple of years, we should be optimistic about the future. With the increasing number of options available, we are excited to see how alternative finance might continue to innovate, to help to boost exports, and maintain a strong and competitive global economy.
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