Photo by Felix Mittermeier from Pexels

There’s enough doom and gloom in our newsfeeds already – you don’t need us to tell you it’s been a tough year. Nor do you need us to tell you that, for the moment at least, it isn’t getting less tough, either socially or financially.

Speaking of the future, though, we believe since there is very little we can do to change the circumstances in the present, we must focus on what is to come and what we need to be doing as a nation to rebuild the economy.

Where better to start than with startups? 

It’s time to look to fledgling businesses to replenish the UK’s depleted economy with fresh opportunities, new ideas and technologies.

We believe that as Corona casualties start to fall again that entrepreneurship will rise from the ashes, breathing vigour into the economic landscape and generating future prosperity for the UK, indeed we are already seeing a marked rise in enquiries from new businesses.

It isn’t merely the launching of new businesses that will be the key to boosting fiscal growth: scaling up these new businesses will truly be the key in the ignition of economic recovery. There are some widely-recognised barriers to this growth for small businesses though, referred to as the ‘growth capital gap’. This represents the difference between the funding that is on offer for young businesses and the capital they need to achieve to rapidly scale up and seize opportunities.

Addressing the funding gap

A new report, The Future of Growth Capital, has stressed that closing the emerging £15bn funding gap would provide essential opportunities for aiding the UK’s economic recovery post-COVID and Brexit.

The growth capital gap, which stood at between £5  –10 billion per year prior to the pandemic has effectively doubled. So, to be clear, this is not a new gap that exists because of COVID-19, but one that was growing and has merely been exacerbated by the pandemic and the economic downturn.

A startup becomes a scaleup when the experimental startup phase has resulted in a clear product-market fit and in clear direction and confidence that further investment of capital will result in returns. It is at this critical juncture where young businesses are able to identify what funding they need in order to expand product lines, increase reach or accept larger projects that they often lack the financial oomph to make it happen. Sadly, in a credit-averse financial market that may be to come, many will remain oomphless, relying on personal finances or family/friends investment that doesn’t always provide enough working capital and comes with emotional ties.

Something perhaps the governments of the day don’t always appreciate is that the close to 40,000 scaleups in the UK contribute £1 trillion to the UK economy each year, representing 50% of the SME economy. The benefits of closing the growth-funding gap that will enable further start ups to scaleup could translate to a powerful impact on GDP and the country’s economic stability.

Growth potential amongst UK scaleups may be the key to economic recovery 

Throughout the COVID-19 period and the inevitable dip in the economy, scaleups have remained innovative, positive and, most importantly, key job creators in a volatile labour market. As we rebuild the economy, it’s so important that the UK focuses not only on the survival of established businesses but also addresses scaleup challenges – lack of growth can be as economically stifling as business failures.

The Future of Growth Capital by ScaleUp Institute, Innovate Finance and Deloitte recommended 5 sensible steps to address scaleup challenges, including accelerating changes in legislation that would unlock institutional and corporate funding. In addition, they recommended expansion and growth of the British Business Bank and its equivalents in the devolved nations – Scottish Investment Bank, Development Bank of Wales and Invest NI.

There are plans to expand the role of Innovate UK and identify our most innovative of young, scaling enterprises, helping them access funding. Last week, the Government launched the new UK Research and Innovation website, run by a conglomerate of nine UK councils including Innovate UK and the Social and Economic Research Council. The website holds the key to numerous opportunities for developing UK talent and allowing young enterprises to search for relevant funding and growth initiatives but many will doubtless fall through the cracks and be over looked.

Startups deserve funding opportunities

This refreshing focus on providing opportunities for young businesses to thrive is encouraging and exactly the kind of positive action needed to see us through tough times. 

Partnership Invoice Finance agree that scaling up young businesses holds the key to economic growth and recovery, and that’s why we believe in providing startups and scaleups with growth funding through our range of invoice finance products. With invoice finance, your borrowing capacity increases with your businesses sales- as you grow your funding grows.

Liquidity is the key to success for all businesses, and a rapidly growing company doesn’t have the luxury of being able to wait for invoices to clear – they need access to that capital to feed back into the business and fund continuous growth.

The invoice finance process is not complicated, and we can usually reach an agreement quickly. No need to continually re negotiate and try to forward project sales to match your increasing needs or wait to see if the facility is agreed or if you will instead have to turn business down. Whether it’s to see you through a tight spot, to pay for labour or materials, take advantage of stock discounts or to invest into your growing business, invoice finance can often be the right finance to fuel growth. 

If your startup is ready to launch or scaling your business is the next logical step, don’t let a lack of access to funding stand in your way. Contact us to find out more about how you can unlock the capital tied up in your unpaid invoices to give your business, and our economy, the fighting chance it deserves.