|
Investment
readiness’:
helping
enterprises
access
equity
finance
for
growth
back
30
March
2001
H
M
Treasury/Small
Business
Service
consultation
document
Introduction
1.
The
Government
places
high
priority
on
improving
the
climate
for
enterprise
creation
and
growth
across
the
UK.
As
part
of
this
strategy,
the
Treasury
and
DTI
have
introduced
in
recent
years
a
portfolio
of
policies
designed
to
improve
the
supply
of
finance,
particularly
risk
capital,
to
enterprises
with
growth
potential.
For
this
capital
to
be
used
effectively,
more
small
and
medium
sized
enterprises
(SMEs)
need
to
have
a
better
understanding
about
whether
external
equity
is
relevant
to
their
business
strategy,
and
if
so
how
best
to
secure
and
manage
this
investment.
To
complement
its
supply-side
measures,
the
Government
intends
to
stimulate
wider
access
for
SMEs
to
advice
to
help
them
to
become
‘investment
ready’.
2.
This
note
sets
out
the
Government’s
proposals
for
taking
forward
policy
in
this
area.
It
is
a
working
document,
and
designed
to
stimulate
feedback
which
can
then
be
used
to
refine
policy
objectives
and
assist
with
designing
their
implementation.
Government
policy
statements
3.
In
the
Pre-Budget
Report
(November
2000),
the
Treasury
highlighted
the
Government’s
interest
in
this
area,
with
the
following
statement:
“To
take
advantage
of
this
increased
[equity
finance]
supply,
more
SMEs
with
growth
potential
need
greater
understanding
of
venture
capital
and
specialist
advice
on
how
to
structure
business
plans
to
secure
external
equity
finance,
to
make
themselves
'investment
ready'.
There
is
evidence
of
a
gap
in
this
market,
akin
to
the
classic
'equity
gap'.
The
Government
has
therefore
asked
the
SBS,
working
with
the
Regional
Development
Agencies
and
in
consultation
with
the
Small
Business
Investment
Taskforce
and
market
practitioners,
to
make
early
progress
in
identifying
measures
to
bridge
this
gap,
with
a
view
to
harnessing
the
expertise
of
the
private
sector
as
rapidly
as
possible.”
back
to
top
4.
The
DTI
followed
up
on
this
initial
proposal
in
the
White
Paper
on
Enterprise,
Skills
and
Innovation
(February
2001):
“Besides
ensuring
that
firms
have
access
to
the
finance
they
need
at
all
levels,
it
is
equally
important
for
firms
to
know
what
external
investment
is
on
offer
and
what
it
means
for
them
to
take
the
plunge.
Some
firms
may
hold
back
from
seeking
external
finance
because
they
are
unsure
about
the
practicalities
and
worried
about
the
complications.
Others
may
not
be
aware
that
they
are
in
a
position
where
external
finance
can
help
them
out
or
can
facilitate
a
new
level
or
dimension
of
operation.
The
Small
Business
Service
(SBS)
will
therefore
launch,
by
the
summer,
a
set
of
initiatives
to
help
small
businesses
understand
external
investment
better
and
become
better
prepared
to
take
it
on.
We
will
be
looking
for
innovative
approaches
to
assist
small
firms
on
this
issue
and
will
encourage
interested
parties
to
come
forward
with
a
range
of
ideas
on
how
the
SBS
can
support,
build
on
and
spread
best
practice,
using
the
Business
Link
network
as
appropriate.”
5.
This
paper
is
aimed
at
raising
awareness
among
key
private
sector
operators,
including
business
advisers,
enterprise
agencies
and
finance
providers
of
the
joint
Treasury
and
DTI/Small
Business
Service
interest
in
developing
policy
in
this
area.
It
is
also
aimed
at
stimulating
early
interest
from
potential
sponsors
of
initiatives
that
could
subsequently
be
supported
by
the
SBS.
back
to
top
Risk
capital
for
SMEs:
Economic
and
market
context
6.
Risk
capital,
in
a
variety
of
forms
and
from
a
range
of
sources,
is
an
increasingly
important
source
of
capital
for
SMEs
in
the
UK.
Whilst
it
currently
accounts
for
only
a
small
proportion
of
total
SME
financing
in
the
UK,
risk
capital
plays
an
important
role
in
financing
higher-growth
small
firms.
Since
the
mid
1990s,
there
has
been
substantial
growth
in
the
supply
of
risk
capital
to
enterprises
from
the
both
formal
venture
capital
funds
and
from
informal
individual
‘business
angel’
investors.
7.
Venture
capital
investment
in
the
UK
rose
to
£1,503
million
in
1999
(up
from
£580
million
in
1995)
involving
some
800
companies.
Of
this
total,
£347
million
was
invested
in
early
stage
ventures
involving
260
companies[1].
Business
angel
investment
is
also
increasing
rapidly.
Although
data
on
this
market
is
much
less
comprehensive,
the
supply
of
UK
business
angel
investment
is
estimated
at
around
£500
million
per
year,
from
some
18,000
actual
and
potential
business
angels,
investing
in
some
3,500
businesses[2].
These
figures
are
backed
up
by
data
on
the
Inland
Revenue’s
Enterprise
Investment
Scheme
(designed
to
encourage
individuals
to
invest
in
smaller
higher
risk
trading
companies);
capital
committed
under
EIS
is
currently
estimated
at
some
£250
million
during
1999-2000,
a
significant
increase
from
the
average
of
£50
million
per
year
in
the
mid
1990s[3].
8.
The
SBS
is
taking
forward
a
number
of
initiatives
aimed
at
increasing
the
supply
of
finance,
in
particular
risk
finance,
to
SMEs.
These
include
the
setting
up
of
Regional
Venture
Capital
Funds
and
the
stimulation,
through
the
National
Business
Angels
Network,
of
the
business
angel
market.
To
complement
these
measures
and
to
ensure
that
small
businesses
can
take
advantage
of
these
new
sources
of
funding,
it
is
important
that
more
small
businesses
are
helped
to
understand
the
options
available
and
know
how
to
make
their
business
proposals
into
attractive
investment
opportunities.
back
to
top
9.
This
increased
supply
of
finance
will
continue
to
seek
out
investee
enterprises
with
the
potential
to
deliver
substantial
growth.
There
is
evidence
that
venture
funds
are
achieving
this
aim
(although
year
on
year
returns
remain
volatile):
the
average
returns
for
early
stage
funds
in
1999
was
40.9
per
cent,
up
from
the
annual
average
return
for
the
five
years
to
1999
of
16.7
per
cent[4].
But
for
this
trend
to
continue,
venture
capital
funds
and
business
angel
investors
need
to
work
with
enterprises
which
have
an
understanding
of
the
potential
and
implications
of
using
external
equity
finance.
10.
This
mismatch
between
the
increased
supply
of
equity
capital
and
enterprises’
ability
and
ambition
to
use
the
finance
effectively
is
of
increasing
concern
to
investors.
Recent
research
by
the
Bank
of
England
concluded
that:
“While
the
availability
of
risk
capital
for
technology-based
small
firms
(TBSFs)
appears
to
have
improved
in
recent
years,
some
firms
still
report
difficulty
in
raising
finance,
perhaps
because
they
are
not
always
seen
to
be
‘investment
ready’.
Initiatives
like
the
Small
Business
Service’s
SMART
scheme,
and
organisations
like
UK
Business
Incubation,
are
making
important
contributions
in
this
area.
But
more
could
be
done
to
assist
start-up
and
early
stage
TBSFs
to
understand
the
expectations
and
requirements
of
investors.”
11.
This
is
borne
out
by
other
research
which
points
to
a
gap
between
demand
and
supply.
Some
small
businesses
owners
in
the
UK
are
put
off
seeking
venture
capital
funding
because
they
are
afraid
it
will
mean
giving
up
control
of
the
business
to
the
investor[5].
Some
of
these
will
own
businesses
with
growth
potential
but
choose
to
keep
them
small
and
independent
rather
than
take
the
equity
route.
Helping
such
people
gain
a
fuller
understanding
of
the
implications
of
giving
up
an
equity
stake
should
lead
to
an
increase
of
the
number
of
investable
projects
that
come
before
investors.
back
to
top
Q1
Is
this
analysis
of
the
relative
weakness
on
the
demand
side
correct?
What
are
the
particular
weaknesses
in
the
understanding
of
external
equity
finance
which
venture
funds
and
business
angels
see
among
potential
investee
companies?
For
what
size
and
stage
of
business
are
these
demand
side
issues
most
acute?
Support
for
“investment
readiness”
12.
At
the
broadest
level,
enterprises’
understanding
and
acceptance
of
external
equity
are
conditioned
by
the
attitudes
to
business
creation
and
growth
in
society
as
a
whole.
The
Government
is
addressing
the
need
for
a
more
pro-entrepreneurial
climate
through
several
channels.
It
is
supporting
‘Enterprise
Insight’,
a
long-term
campaign
to
highlight
the
contribution
of
enterprises
to
job
and
wealth
creation
and
to
celebrate
successful
entrepreneurs
and
growth
companies.
The
Government
is
also
boosting
enterprise
activities
in
schools.
back
to
top
13.
More
specifically
in
the
arena
of
business
financing,
a
combination
of
private
sector
and
public
sector-supported
services
currently
provide
a
range
of
advice
to
SMEs
on
financial
management
issues,
including
access
to
equity
finance:
-
Many
banks
offer
financial
management
information
to
their
SME
customers.
Some
banks
are
participating
in
a
long
term
pilot
study
in
East
Anglia
involving
the
provision
of
extra
financial
management
training
to
participating
firms.
Several
of
the
major
High
Street
banks
are
also
supporters
of
the
National
Business
Angel
Network
and
will
make
referrals
of
SMEs
seeking
risk
capital
to
this
and
other
business
angel
networks.
-
The
British
Venture
Capital
Association
produces
free
guidance
to
entrepreneurs
on
understanding
and
obtaining
venture
funding.
-
Many
accountancy
and
corporate
finance
practices
across
the
UK
provide
professional
technical
support
for
SMEs
to
help
assess
their
business
strategy,
structure
business
plans
and
manage
the
raising
of
equity
capital.
-
Most
Business
Link
operators
(the
local
outlets
of
the
SBS)
provide
general
financial
advice
and
signposting
to
local
private
sector
advisers
in
the
more
specialised
field
of
corporate
finance.
Some
Business
Links
also
support
innovative
‘investment
readiness’
services,
in
partnership
with
local
venture
investors
and
private
sector
business
advisers.
Other
Business
Links
are
partners
in
regional
business
angel
networks.
(Some
examples
are
highlighted
at
paragraph
16
below).
-
Many
enterprise
agencies
and
business
incubators
also
provide
business
mentoring
and
financial
advisory
services
for
their
client
SMEs.
-
Some
business
angel
networks
assist
investee
enterprises
to
improve
their
‘investment
readiness’
as
part
of
their
match-making
service
with
potential
investors.
Q2
How
accurate
is
this
description
of
the
current
array
of
specialist
advice
for
SMEs
on
financial
management
and
risk
capital
raising?
Are
there
particular
sectors
of
the
SME
market,
by
size
of
firm,
geographical
base
or
business
activity,
where
there
are
particular
shortfalls
in
SME
advice?
14.
There
is
persistent
evidence
that
many
UK
SMEs
remain
wary
of
risk
capital
and/or
are
frustrated
about
their
inability
to
raise
sufficient
finance.
At
the
same
time,
venture
capital
providers
are
concerned
about
the
poor
quality
of
many
SMEs’
bids
for
financing.
This
strongly
suggests
that
the
current
patchwork
of
commercial
and
publicly-supported
services
is
not
bridging
the
gap
between
SMEs
and
potential
investors.
back
to
top
15.
This
gap
in
knowledge,
understanding
and
technical
know-how
appears
to
be
most
acute
at
the
smaller
end
of
the
enterprise
finance
market.
It
matches
closely
the
‘equity
gap’
for
investments
of
less
than
£0.5
million
that
has
been
identified
as
a
Government
policy
target
and
is
being
addressed
through
such
measures
as
the
public-private
Regional
Venture
Capital
Funds.
The
economic
factors
behind
this
gap
include:
-
higher
risks
of
developing
smaller
enterprises
with
weaker
finances
and
narrower
range
of
management
skills
and
experiences
(for
example,
the
directors
may
have
had
neither
personal
experience
of
working
with
outside
investors,
nor
of
using
finance
other
than
overdraft
or
bank
loans
and
founders’
equity;
- symmetric
information
between
the
enterprise
and
potential
corporate
finance
advisers,
requiring
the
latter
to
undertake
due
diligence
in
order
to
be
able
to
provide
informed
advice;
-
fixed
costs
of
conducting
due
diligence,
appraising
and
advising
smaller
enterprises,
which
tend
to
make
cost
of
advice
prohibitively
expensive
for
firms
seeking
relatively
small
amounts
of
finance
(i.e.
less
than
£1
million);
-
although
these
costs
can
be,
and
sometimes
are,
deferred
through
use
of
contingent
fees
or,
even
advisers
taking
equity
in
lieu
of
fees,
this
service
is
typically
provided
only
to
those
SMEs
which
are
judged
to
have
reasonable
prospects
of
raising
at
least
£1
million
from
venture
capital
sources.
So
the
‘equity
gap’
in
the
supply
of
capital
has
a
‘knock
on’
effect
in
the
provision
of
risk
capital
advice
to
SMEs;
-
local
banks
providing
debt
finance,
local
accountancy
practices
providing
audit
/
financial
management
services,
and
local
Business
Link
/
enterprise
agencies
may
not
be
well
placed
to
understand
the
extra
risk
capital
needs
of
their
client
SMEs.
Even
where
they
do,
these
local
service
providers
may
not
be
well
connected
to
regional
specialist
sources
of
advice
and/or
regional
networks
of
business
angels
and
venture
capital
funds.
There
can
therefore
be
gaps
in
a
potentially
useful
referral
network.
back
to
top
Q3
Do
these
factors
accurately
describe
the
economics
of
this
particular
market
and
the
potential
barriers
to
its
efficient
operation
for
SMEs
seeking
first-time
external
risk
capital?
Which
of
the
factors
are
most
significant?
Bridging
the
‘investment
readiness’
gap
for
SMEs
16.
The
apparent
gap
in
this
market
is
being
addressed
in
part
in
a
number
of
UK
regions
through
a
variety
of
different
means,
often
involving
a
partnership
between
an
agency
with
the
primary
contact
with
SMEs
and
specialist
advisers.
This
section
highlights
three
particular
examples:
Business
Investment
Network
Limited
The
Network
is
a
non-profit
company
limited
by
guarantee
that
acts
as
a
catalyst
and
clearinghouse
for
bringing
investors
(either
directly
or
through
intermediaries)
and
cash-seeking
companies
together.
It
strives
to
facilitate
agreement
between
potential
investors
and
investees
in
a
positive
and
pro-active
manner,
and
provides
a
forum
for
fast
growing
companies
to
access
all
their
needs
for
profitable
growth.
It
covers
the
Northamptonshire,
Milton
Keynes
&
Bucks
and
surrounding
areas,
and
is
supported
by
the
Business
Links
of
Northamptonshire
and
Milton
Keynes
&
Bucks.
EquityLinkTM
This
independent
and
autonomous
service,
developed
and
operated
since
1995
by
Business
Link
Hertfordshire
and
operating
in
the
South
East
and
East
Anglia,
is
designed
to
help
SMEs
and
advise
them
on
the
routes
through
to
equity
capital.
EquityLinkTM
set
out
to
find
out
what
investors
really
wanted
in
a
company
and
to
introduce
the
parties
much
earlier
in
the
process,
having
found
that
even
where
a
business
plan
had
been
professionally
prepared
it
usually
underwent
substantial
changes
during
negotiations
with
the
parties.
EquityLinkTM
assesses
each
applicant
company’s
realistic
potential
for
growth,
based
on
a
range
of
factors,
and
then
introduces
its
plans
to
investors
which
are
considered
to
be
a
potential
source
of
finance
and
long
term
partnership
for
the
SME.
back
to
top
BL
Hertfordshire
Business
Link
Hertfordshire
has
witnessed
a
large
rise
in
the
number
of
businesses
being
set
up
in
their
area
to
exploit
new
technologies
and
many
of
these
face
problems
in
raising
finance.
To
help
address
this,
they
have
set
up
a
Technology
Exchange
that
includes
Fit
4
Finance
-
an
investment
panel.
The
panel
consists
of
a
representative
of
the
business
angels
pool;
an
expert
on
marketing;
a
venture
capitalist/investment
banker;
a
technical
expert
and
a
representative
of
a
clearing
bank.
The
panel
goes
through
a
business
proposal
with
the
entrepreneur,
tearing
it
to
pieces
and
putting
it
back
together
again.
The
benefits
to
the
entrepreneur
come
as
much
from
the
learning
experience,
and
the
contacts/leads,
as
the
potential
investment.
20%
of
proposals
examined
go
on
to
attract
finance
(usually
amounts
below
£150,000).
mustard.uk.com
mustard.uk.com
was
established
in
2000
as
a
new
interface
between
new
and
aspiring
West
Midlands
entrepreneurs
and
the
support
they
may
need
to
develop
their
new
business
to
its
fullest
potential.
Working
with
mustard.uk.com
to
develop
their
business
gives
entrepreneurs
access
to
a
portfolio
of
tailor-made
support
from
business
consultants
in
the
region.
mustard.uk.com
aims
to
help
to
SMEs
through
providing
access
to
business
solutions,
an
inside
track
to
finance,
business
planning,
legal
know-how
and
technology.
The
initiative
typically
provides
around
£5,000
of
professional
support
to
help
high
growth
start-ups
including
technology
based
companies.
back
to
top
Q4
What
other
‘investment
readiness’
services
are
provided
for
SMEs?
How
do
the
services
differ
across
the
UK’s
regions?
To
what
extent
are
different
publicly-funded
agencies
(such
as
Business
Links)
involved
in
different
services,
either
as
provider
of
advisory
services
or
co-funder
of
services
provided
by
others?
What
evidence
is
there
of
the
effectiveness
of
such
services?
17.
These
examples
highlight
the
variety
of
means
for
addressing
SMEs’
demand
for
high
quality
and
accessible
advice
on
raising
equity
finance
to
help
them
meet
their
business
strategies.
Each
approach,
however,
is
based
upon
linking
a
number
of
elements
to
provide
a
connected
service:
-
Definition
of
the
target
group
of
SMEs
-
Accessing
and
networking
with
potential
SME
clients
- Selecting
SMEs
for
provision
of
service
-
Referral
to
advice
providers
- Interface
with
equity
finance
suppliers
Linking
these
elements
of
the
service
is
the
role
played
by
the
service
‘sponsor’,
responsible
for
defining
the
service
parameters
and
contracting
with
the
various
partners.
18.
The
following
section
describes
briefly
each
of
these
service
elements
Q5
How
well
does
the
following
describe
the
stages
in
the
provision
of
‘investment
readiness’
advice?
-
Definition
of
the
target
group
of
SMEs:
this
varies
according
to
the
nature
of
the
regional
equity
finance
market
and
the
advisory
skills
which
the
service
can
deploy.
But
operating
according
to
a
clear
definition
is
important
as
this
helps
to
focus
limited
resources
on
those
enterprises
which
can
most
benefit
from
the
service.
External
equity
finance
will
always
be
of
relevance
to
only
a
minority
of
SMEs,
so
it
is
important
that
advisory
services
are
able
to
filter
at
an
early
stage
those
for
whom
further
support
is
likely
to
be
useful.
back
to
top
Q6
What
particular
definitions
of
target
SMEs
are
currently
used?
What
definition
would
encompass
that
group
of
SMEs
which
would
benefit
from
‘investment
readiness’
advice
and
which
currently
may
struggle
to
obtain
such
advice
on
a
fully
commercial
basis?
What
are
the
pros
and
cons
of
widening
the
definition
to
include
smaller
enterprises?
-
Accessing
potential
SME
clients:
most
services
attract
SMEs
through
use
of
web-based
marketing,
supplemented
by
referral
via
the
respective
networks
of
the
organisations
which
together
make
up
the
service
partnership.
There
may
also
be
signposting
to
the
service
from
other
organisations
which
are
not
partners
in
the
service.
Q7
What
mechanisms
work
well
in
ensuring
that
‘investment
readiness’
services
are
publicised
to
a
wide
range
of
potential
SME
clients?
How
can
organisations
as
part
of
a
service
partnership
efficiently
refer
their
SME
clients
to
the
point
of
initial
assessment
and
service
provision
thereafter?
What
are
the
incentives
on
individuals
and
organisations
to
make
such
referrals?
What
are
the
pros
and
cons
of
widening
the
referral
networks
within
a
particular
region
to
encompass
more
organisations
which
have
a
commercial
interest
in
the
successful
financing
and
growth
of
SMEs?
-
Selecting
SMEs
for
provision
of
service:
since
most
services
are
part
financed
from
public-sector
resources,
and
the
charge
to
each
SME
therefore
below
the
full
market
cost,
some
other
means
of
filtering
demand
is
necessary.
The
selection
of
SMEs
typically
uses
a
combination
of
the
definition
of
the
target
group
along
with
an
initial
qualitative
and/or
quantitative
assessment
of
how
applicant
SMEs
match
up
against
the
definition.
On
completion
of
this
stage,
SMEs
are
often
charged
a
relatively
low
nominal
figure
as
sign
of
their
commitment
to
the
process.
-
Referral
to
advice
providers:
following
the
initial
sift,
SMEs
are
referred
on
to
the
advice
provider,
either
within
the
same
organisation
(as
with
some
of
the
Business
Link-run
services)
or
to
one
or
more
specialists
within
partner
organisations.
At
this
point,
the
SME
accesses
a
range
of
advice
on
business
strategy,
planning
and,
in
light
of
this,
raising
risk
capital
from
a
variety
of
sources.
Q8
What
are
the
pros
and
cons
of
providing
the
specialist
advice
to
SMEs
in-house
versus
contracting
it
out
to
other
organisations
within
the
service
provider
partnership?
What
is
the
scope
for
involving
individuals
with
relevant
business
experience
(for
example,
former
venture
capitalists,
business
angels
or
corporate
financiers)
to
provide
advice
on
a
sub-commercial
pro
bono
basis?
- Interface
with
equity
finance
suppliers:
following
the
advice
provision,
many
services
also
arrange
introductions
with
equity
suppliers,
through
networking
with
business
angels
and
venture
capital
funds.
Support
for
the
SME
may
also
continue
through
the
negotiation
process
with
potential
financiers.
On
completion
of
a
capital-raising
exercise,
many
service
providers
will
charge
a
small
percentage
of
the
money
raised
as
a
contingent
success
fee.
back
to
top
Q9
What
are
the
typical
fee
structures
used
in
‘investment
ready’
services?
How
common
are
success-contingent
fees
and
equity
stakes
in
lieu
of
cash
fees?
For
publicly
supported
services,
what
is
the
typical
level
of
subsidy
per
SME
client
obtaining
advice?
Government
strategy
for
improving
SME
‘investment
readiness’
19.
The
SBS
is
already
committed
to
take
forward
policy
delivery
in
this
area.
It
will
be
doing
this
in
consultation
with
the
Small
Business
Investment
Taskforce
(SBIT)
and
market
practitioners.
An
Executive
Sub-Group
of
the
SBIT
has
been
created
to
examine
the
related
issues
of
investment
readiness
and
financial
management.
The
Sub-Group
will
be
involved
in
the
analysis
of
responses
to
this
consultation
document
and
will
also
take
part
in
the
assessment
of
proposals
to
enhance
and
spread
best
practice.
20.
This
note,
and
the
discussion
stimulated
by
it,
should
help
the
SBS
refine
analysis
on:
- coverage
of
existing
services,
-
potential
gaps
in
the
provision
of
‘investment
readiness’
advice,
- effective
mechanisms
to
link
SMEs
with
advice
providers.
The
SBS
and
Treasury
will
also
be
considering
the
‘feedback
loop’
between
supporting
the
demand
side
(advice
and
mentoring
to
enterprises)
and
incentivising
the
supply
of
risk
capital
(e.g.
through
Enterprise
Investment
Scheme,
Venture
Capital
Trusts,
capital
gains
tax
incentives,
and
publicly-supported
Regional
Venture
Capital
Funds).
Finally,
Government
will
also
look
internationally
at
policy
approaches
and
best
practice
overseas.
back
to
top
21.
There
are
four
main
approaches
which
the
Government
could
take
in
order
to
enhance
the
current
service
to
SMEs:
- For
regions
which
do
not
at
present
have
any
publicly-supported
‘investment
readiness’
service
accessible
to
a
wide
range
of
SMEs,
the
Government
could
work
with
regional
partners
in
the
private
sector,
including
Business
Links
where
appropriate,
to
help
catalyse
the
creation
of
such
a
service.
The
aim
would
be
to
build
on
best
practice
learnt
in
other
UK
regions.
- Wiith
respect
to
existing
services,
the
Government
could
support
a
widening
of
the
service
to
encompass
a
broader
target
group
of
SMEs.
This
might
make
advice
more
accessible
to
SMEs
which
are
potentially
looking
to
raise
capital
in
the
‘equity
gap’
(first
round
external
financing
of
between
£100,000
and
£0.5m).
Additional
Government
support
could
help
make
economic
a
service
which
would
otherwise
be
too
costly
given
fixed
costs
and
the
relatively
small
amounts
of
capital
involved.
- The
Government
could
also
support
the
widening
of
the
referral
network
for
existing
services,
helping
to
bring
in
more
partners
and
creating
incentives
for
them
to
make
informed
referrals
of
their
SME
clients.
This
could
help
increase
the
throughput
of
the
service,
improve
referral
efficiency
within
a
region,
and
may
help
reduce
unit
costs
by
improving
deal
flow.
- Finally,
the
Government
could
support
the
involvement
of
a
wider
range
of
specialist
advisers
in
existing
‘investment
readiness’
services.
This
could
help
bring
extra
professional
expertise
to
bear
in
helping
a
larger
group
of
SMEs.
In
the
case
of
all
of
the
above
approaches,
the
Government
would
aim
to
work
with
the
Regional
Development
Agencies
(RDAs)
who
have
the
overarching
objective
of
improving
the
environment
for
enterprise
growth
within
their
region
through
coordinating
a
range
of
business
support
activities.
back
to
top
Q10
Views
are
invited
on
the
relative
merits
of
Government
action
along
the
lines
outlined
above.
Next
steps
22.
The
Government
intends
to
take
forward
policy
design
and
implementation
to
the
following
timetable:
-
April/May:
consultation
with
market
practitioners,
RDAs,
Business
Links
and
others
and
further
refinement
of
SBS
analysis
of
current
market
coverage
and
the
scope
for
and
design
of
further
Government
support.
-
May/June:
SBS
to
invite
formal
tenders
against
a
more
developed
specification,
for
proposals
to
enhance
and
spread
best
practice
in
the
provision
of
‘investment
readiness’
services
to
SMEs
whose
access
to
such
services
would
otherwise
be
restricted.
-
July
/
August:
SBS
assessment
of
bids
and
announcement
of
proposals
to
receive
initial
backing.
-
September
/
December:
further
SBS
analysis
of
market
coverage
and
of
early
results
of
SBS-supported
projects.
-
First
half
2002:
SBS
to
invite
tenders
for
a
national
programme
of
regional
services,
informed
by
evidence
from
market
developments
and
the
results
of
the
summer
2001
pilot
projects.
back
to
top
23.
Responses
to
this
document
should
be
sent
to:
Paul
Kenny
Small
Business
Service
Investment
Directorate
St
Mary’s
House
C/o
Moorfoot
SHEFFIELD
S1
4PQ
Paul.Kenny@sbs.gsi.gov.uk
by
11
May
2001.
Further
copies
of
this
document
are
available
on
the
following
SBS
websites:
www.businessadviceonline.org/consult/
www.sbs.gov.uk/consultations/
and
on
the
Treasury
website
at:
www.hm-treasury.gov.uk
|
