Member Article

Northern steel investor backs CBI call for equity finance

A business support organisation which invests money as a subsidiary of Tata Steel has added its voice to the CBI’s call for more companies to consider equity finance when looking for investment.

UK Steel Enterprise Ltd have backed the CBI’s “Slice of the Pie” report which highlights the UK’s over-reliance on traditional debt finance, and suggests equity finance could help growth.

Simon Hamilton, managing director of UK Steel Enterprise, said: “The report highlights that although only 3% of growing firms use equity finance, two thirds of those who do use it report a positive experience.

“We echo that as we have found that equity finance can work really well for small and medium sized enterprises (SMEs) as well as larger companies. As a regeneration body, we aim to help businesses looking for relatively small amounts of investment and can provide share packages up to £750,000.”

Chemical processing company Exwold Technology Ltd benefitted from a small loan from UK Steel Enterprise in its earliest days followed four years ago by £250k in an equity finance package that was part of a £1 million investment into new roll compaction technology and stock control system.

Now operating from three sites in Hartlepool and Billingham with a turnover approaching £5 million and 60 employees, around 70% of its business is export and customers include multi-national companies in numerous sectors including agrichemical and petrochemical.

Managing director Kevin Martin said: “Equity finance was the ideal route for us. We feel that we have benefitted not only from having no loan repayments but also from our long-term partnership with UKSE. It is a source of valuable advice and support and also demonstrates to others that UKSE has confidence in the company.”

“It is one of the key advantages in taking equity funding that all the cash stays in the business rather than having to be used for loan repayments,” said UKSE’s Simon Hamilton. “Other benefits for SMEs include a strengthened balance sheet and the possibility of further expansion finance from a source with a real vested interest in the business.

“It is also a myth that using equity finance results in a loss of control. UKSE is not here to run businesses and we never take a controlling interest but we are a source of support and advice that our companies say is a real benefit.

“We would encourage companies to talk to their business advisers about equity finance as many growth projects stall when more traditional funding routes are exhausted. Equity funding can, quite simply, help a business do what it wants even if loan funding is not available. Our aim is always to tailor a financial package that is right for the individual company

This was posted in Bdaily's Members' News section by Tom Keighley .