Small businesses create 50% of jobs in G20, but only receive 6% of investment: Ernst & Young
(Toronto, 18 June 2012) Despite being key engines of economic growth — accounting for 50% of employment in most G20 countries — small to medium-sized enterprises (SMEs) only attract a tiny proportion of overall investment, according to Ernst & Young’s new report Funding the future.
Despite intervention by a number of G20 governments, bank lending remains difficult to obtain, particularly in the early stages of growth. And total investment in SMEs across the G20 stands at just US$714 billion, 6% of the total US$11.507 trillion for all forms of investment.
“Access to funding continues to be one of the most significant challenges for the creation, growth and survival of SMEs, particularly innovative ones,” says Colleen McMorrow, Ernst & Young’s Entrepreneurial Services Leader in Canada. “In our survey of more than 1,000 entrepreneurs across the G20, almost two-thirds found access to finance difficult in their country.”
According to the report, SMEs at every stage of growth can take improving access to capital into their own hands by considering the following solutions:
- Pre-seed and seed stage: Manage cash carefully to minimize need for external finance in the early stages, and assess whether innovative funding models are right for your business.
- Startup stage: Explore options for managing working capital, such as invoice finance, and tap into networks of angel investors.
- Emerging growth stage: Have a credible plan to take to banks, seek out specialist or community banks that may have a stronger link with your business, and explore the potential for corporate venturing.
- Expansion stage: Use junior stock markets as a source of funding, open up to international markets as opportunities arise, and explore private equity options.
“Creating a vibrant entrepreneurial environment requires action on many fronts, both on the side of the entrepreneur and their government. Each stakeholder must play their part to ensure that funding is available at every stage of business development,” says McMorrow. “Because without the ability to secure funding, entrepreneurial companies will be unable to reach their growth potential and may not survive at all.”
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