Capital access in 2012 to be difficult

23% of mid market entrepreneurs believe securing access to capital this year will be ‘very hard’, and 48% believe it will be ‘quite hard’

According to the Investec Entrepreneur Confidence Index, which tracks the confidence levels of leading UK mid-market entrepreneurs, 71% expect access to external capital to be difficult this year. Nearly one in four of those interviewed expect it to be ‘very hard’ to secure and only 9% said it will be ‘easy’ to obtain.

Some 31 of the country’s leading entrepreneurs were interviewed, and their businesses have a combined annual turnover of £1.3 billion or £42 million each. In terms of sources of capital entrepreneurs intend to access, apart from retained earnings (which 87% plan to use), the most popular will be bank loans and overdrafts (61%). This is followed by cost savings in businesses / working capital (35%) and invoice discounting / asset based lending (29%). Nearly one in four (23%) plan to use mezzanine finance, the highest recording for this source of capital since the Index was launched in 2009, and nearly one in five (19%) said that they planned to raise funds through venture capitalists and private equity firms.

Ed Cottrell, Investec said: “The ‘Entrepreneurial class’ has a key role to play in helping the UK economy to grow, and our findings show that many have plans to expand their operations. However, some clearly have concerns about raising capital from third parties, so it is not surprising to see so many planning to use retained earnings and cost savings in their enterprises to fuel their growth. It is also interesting to note that many plan to make greater use of alternative sources of finance, including mezzanine finance and asset based lending. This helps explain why over the past 12 months, we have dramatically increased the amount of money we have lent to successful entrepreneurs, and we plan to continue supporting them.”

The Investec Entrepreneur Confidence Index (‘the Index’) was launched in December 2009 and is updated twice a year.