Northern Ireland companies ignore funding opportunities to help their business grow, report says
According to a report released today, business owners in Northern Ireland are more likely than any other part of the UK to use overdrafts, loans and credit cards to keep their businesses running instead of ‘alternative finance.
The government-owned British Business Bank Regions and Nations Tracker also said entrepreneurs in rural areas of the region were more likely to have to invest their own money in businesses, compared to those in areas urban.
The Economic Development Bank said such disparities in access to equity finance and private debt resulted in “a waste of economic potential.”
Its report says Northern Ireland accounts for less than 1% of UK equity investment, with 86% swallowed up by London, the south-east, north-west and east of England.
However, these parts of England only accounted for 55% of UK businesses.
The bank said equity financing and private debt could support companies with rapid growth potential.
But despite the relative lack of equity finance deals here, the bank said there is a strong local finance ecosystem. Investors and the companies they supported had been within 20 minutes of each other in 44% of equity investments between 2011 and 2020.
Belfast firms accounted for 62% or 144 of the 231 associations with private equity, while Mid and East Antrim were the second most popular with 18, followed by Lisburn and Castlereagh with 14.
Catherine Lewis La Torre, CEO of British Business Bank, said: “The decline in financial flows in Northern Ireland reflects a population of businesses operating with less choice.
“These gaps in financing growth undoubtedly hold back ambitious entrepreneurs and waste economic potential. This is something the British Business Bank is committed to changing.
The report found that construction business owners in rural Northern Ireland were the most likely to invest personal funds in their business, with 38% doing so compared to 27% of their urban counterparts.
About 58% of all businesses in Northern Ireland are registered in rural areas.
Mark Sterritt, UK Network Director for Northern Ireland, said: “In Northern Ireland, equity financing of third parties such as business angels, venture capital funds and crowdfunding platforms in stocks is considerably rarer than basic debt products.
“Despite its relative scarcity, equity financing makes a disproportionate contribution to the economy by supporting companies with the potential for rapid growth.
“Companies looking to expand or even create new markets as well as those looking to fuel rapid growth may not be able to obtain debt financing due to their risk profile, lack of collateral. or variable cash flow.
“For these companies, equity investments that do not come with regular repayments can create a path to realize their growth plans.”
The bank said it is committed to addressing imbalances in access to external finance and here is supporting £ 81.8million in financing, which has reached 1,773 companies.
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