Equity finance is no longer the preferred financing option for UK small businesses
Barely 39% now say that a capital increase would be their first port of call for external financing, compared to 52% who would choose bank debt. That has now changed, with small businesses across the country citing a preference for bank debt over a capital raise for the first time since the organization began surveying listed UK small and medium-sized businesses in 2011.
“It seems that it is the context of pandemic recovery that has made bank financing less expensive,” he continued in a statement accompanying the results of the investigation. “Many listed companies have already been backed by public capital recently and reduced their debt during the pandemic if they could, so this may be the best time to take advantage of cheaper debt.”
The QCA says there are a number of factors potentially behind the change. First, he speculates that very low interest rates may make debt more attractive, but notes that this is a long-term trend “which has been the case since the Bank’s monetary policy. England has been relaxed in response to the financial crisis ”.
With the UK economy facing a number of headwinds – including shortages of delivery drivers, supply chain bottlenecks and staff shortages – in what is normally one of the busiest times. busiest of the year, the QCA adds that its survey indicates increased pessimism among small and medium-sized businesses. -capitalize businesses across the economy.
“Consistent with the long-term trend, the outlook for the wider economy shows less optimism from companies about their view of their own business performance,” he notes. While the CBD says companies have generally “remained confident in their own prospects,” sentiment has also waned: the overall business outlook figure for companies has fallen from 77.2 to 73.1 out of 100 on the index. optimism from QCA.
In September, data from Link Group showed a “dividend boom” in the second quarter of 2021 among companies listed on the London AIM market. First-half dividend growth for AIM-listed companies was 40.7% after increasing in the second quarter when underlying dividends (which exclude one-time special dividends) climbed 56.6% , with small-cap companies paying out £ 265 million ($ 365 million) to shareholders. , Link said at the time. The “rebound” came after AIM payments fell 40.4% in the first four quarters of the pandemic, he noted.
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