Securing capital in 2011

According to the survey by Investec Specialist Private Bank, three-quarters of entrepreneurs expect it to be difficult to secure capital in 2011, up from 64 per cent last June.

Many will look to a variety of alternative sources, with six per cent expecting to use their credit cards, and the same percentage will look to secure equity from friends, family and associates. Eleven per cent say that they will have to sell assets in order to raise capital.

Despite this, 61 per cent still intend to use bank loans and overdrafts next year, but the main source of capital will be retained earnings, which eight out of ten entrepreneurs intend to use to fund their UK businesses.

The list below shows the sources of capital and the percentage of leading British entrepreneurs who plan to use them in 2011:

Retained earnings: 81%

Bank loan/overdraft: 61%

Invoice discounting or asset based lending (excluding leasing): 39%

Cost savings in businesses/improved working capital: 36%

Raise equity from VC/private equity: 25%

Lease assets: 22%

Mezzanine finance: 14%

Raise equity from angels: 14%

Sell assets/divisions/subsidiaries: 11%

Borrow from friends, family or associates: 8%

Credit cards: 6%

Raise equity from friends, family or associates: 6%

 

The research also reveals that nine out of ten expect the profitability of their UK businesses to increase in 2011, and four out of ten think it’s very likely that they will launch new ventures over the next 12 months.

Let’s hope their plans aren’t jeopardised because of difficulties in securing capital.

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