Funding gaps threaten growth potential for Scottish SMEs

02/05/2024

FM Equity Partners, a leading provider of growth capital to UK entrepreneurs, has unveiled insights from its latest report shedding light on the funding landscape for Scottish entrepreneurs. While Scotland boasts a vibrant entrepreneurial ecosystem and a notable appetite for professional capital, the report highlights significant challenges hindering the region’s growth potential.

Scottish entrepreneurs are among the most likely across all regions surveyed to have encountered hurdles in securing capital. 88% of entrepreneurs in Scotland report having experienced barriers to accessing finance. The report underscores the urgent need to address the barriers that impede Scottish entrepreneurial businesses’ access to finance to achieve their growth ambitions.

According to the findings, Scottish entrepreneurs exhibit a strong propensity for seeking professional funding, with over a quarter (26%) having accessed funding from private equity, and 12% from venture capital trusts (VCTs) to fuel their business growth. However, despite this promising trend, YFM Equity Partners’ data indicates that there exists an untapped opportunity for organisations capable of providing professional funding or facilitating connections with finance through investor networks in the region.

Key challenges identified include difficulties in finding the right investors, with 32% of Scottish entrepreneurs citing this as a major obstacle compared to the national average of 29%. Additionally, 35% express a lack of clarity regarding the best funding options, while a third (32%) highlight the absence of appropriate contacts or business networks to navigate funding avenues effectively.

The report further reveals that Scottish entrepreneurs resort to bootstrapping as a predominant means of funding their ventures, with half (50%) tapping into personal savings to support growth. Moreover, 35% turn to friends or family for loans, significantly higher than the 17% national average.

Commenting on the findings, Mike Clarke, Partner at YFM Equity Partners, remarked, “Scotland’s entrepreneurial landscape is brimming with potential, yet the prevalence of funding gaps poses a formidable barrier to growth. There is a clear need for concerted efforts to bridge these gaps and provide Scottish entrepreneurs with the necessary resources and support to thrive.”

YFM Equity Partners is committed to addressing these challenges by leveraging its expertise and network to empower Scottish SMEs. Through strategic partnerships and tailored financing solutions, YFM aims to unlock opportunities for growth and foster a thriving entrepreneurial ecosystem in Scotland.

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