Access to funding is holding back entrepreneurs who want to start or expand businesses worldwide.
Entrepreneurs feel they cannot succeed unless their financial issues are resolved with the help of government policy changes and better lines of credit.
The message comes from international accountancy firm Ernst & Young, who surveyed businesses around the world and asked them about their experiences trying to team up with financial backers.
In the G20 leading industrial economies, nearly three-quarters of entrepreneurs claimed they had difficulties in accessing finance in their country.
Half said improved funding opportunities would help them grow their businesses, and almost half said crowdfunding was growing apace in their nation as an alternative to bank finance.
Plan for action
The report from Ernst & Young wants government to develop a network of finance options for entrepreneurs at different stages in their business timelines.
The suggestions include:
- Incentivising new sources of funding – perhaps by bringing in tax breaks like the UK’s Seed Enterprise Investment Scheme (SEIS)
- Developing funding platforms, like crowdfunding and microfinance
- Targetting venture capital finance on start-ups , again with tax incentives
For businesses past the start-up stage and ready to grow, governments need to look at more non-traditional finance routes, like corporate venturing, joint projects or supply chain funding.
Entrepreneurs around the world are suffering from a post-recession funding drought.
In Mexico, 80% of new businesses are financed by family and friends, while the rest rely on cash from the government or grants.
Mix of money and advice
The report also suggests governments could take advantage of credit guarantee lending that will release cash from banks underwritten by the government when businesses reach performance targets.
This, argues Ernst & Young, would take away the reliance on collateral funding demanded by the banks.
In a call-to-action, the firm wants governments to:
- Assess how start-up businesses raise cash and operate
- Offer mentoring as well as money
- Help with access to funding
- Better support stock markets
At the same time they want entrepreneurs to pick the right funding source for a start-up and look at equity funding.
“Many of the best start-ups have a mix of money and business advice. Tapping into business angel and entrepreneur networks can helps with this,” said the Ernst & Young report.
“More consideration should be given to public and private joint ventures, with business offering advice and mentorship, while governments offer funding and support like online services and meeting spaces.”
