Entrepreneurs will increasingly rely on equity finance to grow their businesses as the economy recovers, a report has claimed.
The latest quarterly briefing from the Association of Chartered Accountants (ACCA) SME Committee said that the economic recovery could potentially provide a watershed moment for angel finance.
ACCA said that business angels could fill the gap left by the end of the era of “easy credit” but that equity investors needed more support, particulary in an environment with fewer exit opportunities.
Professor Robin Jarvis, head of SME affairs at ACCA, said the government’s Rowlands Review of growth finance, launched by the Department for Business, Innovation and Skills (BIS) in June, was unlikely to go far enough to uncover what support is needed.
Jarvis said: “For years, individual equity investors have been out of the limelight, first hit by the dot-com bust, then crowded out by easy credit and now discouraged by the economic climate.
“The Rowlands Review is looking into ways of supporting established, cash-positive businesses with solid growth potential. There may well be a case for that, but that’s not the kind of businesses that new, innovative industries are built on.”
The SME Committee, comprised of entrepreneurs, advisers, investors and members of all major business lobby groups, is calling for greater support for individual angel investors.
ACCA’s report calls for work in four key areas to increase small businesses' access to equity finance and investment options for angels: greater tax incentives; more support for angel networks; accountants playing a greater role in promoting investment-readiness and increasing exit opportunities.
“The Committee is concerned that the government does not have enough information on business angels to inform policy in this area, so we’re working with BIS to correct that,” Jarvis added.
© Crimson Business Ltd. 2009