Northern Ireland's strengthening funding ecosystem can support ambitions of scaling up

Mark Sterritt

FROM ‘houl yer whist' to ‘wind yer neck in', Northern Ireland has some brilliant sayings which are truly unique to here.

But when I speak to our smaller business owners about external finance options, there's one phrase I hear consistently that could go a long way to explaining why they rely heavily on core debt products.

“That's how we've always done it,” is often the response when asked why businesses readily turn to products such as loans, overdrafts, leasing and credit cards instead of exploring their options around equity finance. We can be quite conservative in our approach to finance in Northern Ireland and averse to taking on new ideas.

Last week the British Business Bank's first annual Regions and Nations Tracker revealed that Northern Ireland is the UK's most reliant region on core debt products. The report also outlined how economic potential continues to be wasted due to regional disparities in access to equity finance and private debt.

There's nothing wrong with sticking with what you know, but it should be more widely understood that both equity finance and private debt can support companies with the potential for rapid growth. Currently some businesses in Northern Ireland are operating with fewer choices which, I believe, holds back our ambitious entrepreneurs.

Companies looking to expand into, or even to create new markets, as well as those looking to fuel rapid growth may be unable to secure debt finance due to their risk profile, lack of collateral or variable cash flows. For these companies, equity investment that does not come with the need for regular repayments could well create a runway to deliver on growth plans.

There's an argument that some businesses simply don't know the breadth of options around external finance available to them.

An Ipsos MORI poll of finance intermediaries conducted on behalf of the bank earlier this year found that lack of awareness of options available, access to supply of finance, and aversion to taking on finance are perceived to be the top three barriers to smaller businesses' demand for finance in Northern Ireland.

The Regions and Nations Tracker does reveal evidence of a strong local funding ecosystem in Northern Ireland with investors having an office within two hours of the business they have invested in in 59 per cent of cases.

This was particularly true for Belfast, with 44 per cent being just 20 minutes away. Northern Ireland ranks second only to London on this metric.

The report also found agriculture, forestry and fishing account for 41 per cent of rural businesses here in Northern Ireland, while access to growth finance is particularly difficult for rural business owners who are more likely to resort to injecting personal funds into their businesses than urban counterparts.

We remain committed to raising awareness of and improving access to external finance for local smaller businesses, and will sponsor the Inbound Investors event being hosted by Catalyst on October 19 & 20 which brings more than 50 funders (venture capital funds, family offices etc) from across the UK to Belfast, which is a real coup and testament to the collaboration of local stakeholders in making it happen.

The funders will have the opportunity to be immersed in the local business ecosystem and not only meet high calibre businesses but also network with the funding scene and support structures which are crucial in making Northern Ireland such a great place for these progressive and innovative businesses to grow and scale.

Between the funders themselves and the networks they can provide access to, there is probably a war chest of around £1 billion coming to Belfast. It's important that businesses here have the same opportunity to access it as a business based in London or elsewhere.

The calibre of smaller businesses is not in doubt and the funding ecosystem is in place to support their growth ambitions. Smaller businesses can lead Northern Ireland's recovery, so they can!

:: Mark Sterritt is UK network director (Northern Ireland) at British Business Bank

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