A new Ernst & Young report—entitled "Funding the future"—has found that SMEs only attract a tiny proportion of overall investment despite accounting for 50% of employment in most G20 countries. According to the report, total investment in SMEs across the G20 stands at just US$714-billion—or 6% of the total US$11-trillion for all forms of investment, such as bank loans, venture capital, IPOs, private equity, public aid, and angel investors.
"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 accessing financing difficult in their country."
Access to funding continues to be one of the most significant challenges for the creation, growth and survival of SMEs, particularly innovative ones
The report recommends these four tips to help SME owners improve their chances of accessing capital:
- Manage cash carefully to minimize the need for external financing in the early stages of your business, and assess whether innovative funding models are right for you.
- Explore options for managing working capital, such as invoice financing, and tap into networks of angel investors
- Have a credible plan to take to the major banks, seek out investment specialists or community banks that may have a stronger link with your business, and explore the potential for corporate venturing.
- For more established companies, use junior stock markets as a source of funding, open up to international markets as opportunities arise and explore private equity options.
Download the report for more details on the funding crisis faced by small and medium-sized companies.