This focus on providing access to growth finance will be welcomed by many small businesses, including the graduates of the Goldman Sachs 10,000 Small Businesses (10KSB) UK programme. Earlier this year a survey of 600 fast growing businesses as part of our 'Generation Growth Small Business Manifesto' found that just over one in three (37%) small business owners had not been able to access the finance they needed for their business in the UK.

However, policies to get investment into small businesses should go beyond just making funding available. They must ensure that small business owners know how to access it. 

Navigating the funding maze 

A lack of funding provision is not the only reason that small businesses are struggling to access funding. A recent study carried out by the British Business Bank with finance intermediaries working with small businesses, such as lawyers, accountants and brokers, found that 60% believed a lack of awareness of finance options was the biggest barrier stopping small businesses from accessing funding. 

The investment world, especially venture capital, speaks a different language to the rest of us and we shouldn’t be surprised if entrepreneurs struggle to navigate it. Business owners who are new to seeking investment are expected to become knowledgeable about the difference between venture capital, angel investment and private equity and to be able to explain their burn rate, run rate and the importance of their valuation, while still doing the day job of running their business. 

This challenge is exacerbated by further systemic disparities that disadvantage female and ethnic minority entrepreneurs. Research from the British Business Bank has found that not knowing where to find appropriate finance has increased substantially in recent years for female and ethnic minority-led businesses. The research also shows that ethnic minority-led businesses are more likely to be turned down for finance, whilst the Rose Review of Female Entrepreneurship, identified access to finance as one of the key challenges for female entrepreneurs, with women’s average starting capital 50% lower than men’s. 

Funding options must be inclusive and aligned to the needs and constraints of diverse SMEs, in order to drive up awareness and confidence. 

Closing the gap between founder and funder

One route to helping businesses navigate the investment landscape is education programmes such as 10KSB UK. 10KSB UK graduates are knowledgeable about the available funding options and 87% told us they were supportive of the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS).

We should look for more ways to get information on finance out to a larger SME audience, such as through local advisors, targeted educational resources, and mentorship. 

Government could play a role by developing and investing in a national awareness campaign, targeting SMEs with information about the existing funding sources that are available. Modern technology can also help here, new digital tools and platforms have the potential to simplify the funding process and connect entrepreneurs with the right sources of investment and even guide them through the application process.

There is also a job for the investment and banking industry to do. Losing the jargon and making products and communication clearer and more accessible to less experienced business founders should be a priority for those offering investment. Investors taking more responsibility for educating founders seeking finance on how to engage with them would go a long way too. 

This should have a particular focus on underrepresented female and ethnic minority founders. Doing so will increase the confidence of our entrepreneurs not only in themselves, but in the UK as a place to grow their business.

Kick-starting economic growth 

The Labour Party's initiative to prioritise small businesses and unlock investment through a £7 billion wealth fund and reforms to the British Business Bank is a positive step. While the new Business Secretary’s statement in his first few days in the role that small business is one of his department’s top four priorities also sends an important message. 

By focusing on inclusivity and accessibility, we can empower small business owners to access the finance they need to grow their businesses and play their part in kick-starting economic growth.