Business Angels: a key source of finance

written by Angela Knight on 10/02/2012

An event today at 10 Downing Street acknowledged the premier importance of business angels. Not only do angel investors bring vital finance and investment to businesses, they also offer that all-important guidance and mentoring to companies as they develop and grow. I was delighted to be at Number 10 this morning and recognise the contributions angels make to British business.

There are approximately 15,000 angels in Britain, investing nearly £1 billion every year. As such, angels figure the most important source of capital for start-ups and early stage businesses, and 2012 is going to be an exciting year for angel investment. The landscape of UK policy is shifting to encourage and incentivise angels, as well as the various co-investment opportunities that partner public and private financial support.

We felt first hand the positive impact Angel investment has had last year when we rolled out the Better Business Finance (BBF) campaign. Regional outreach events were a central feature of the BBF programme: the BBA and its members took to the road to improve bank relationships with business, ensure access to finance and pave routes to alternatives sources of funding.

It is critical that a business at every stage of its development secures the right finance from the right partners for its specific needs. Listening to the dialogues between those who provide finance and those businesses who seek it in towns and cities across the country, it was clear how important the Angel community is to the UK's start-up and growing companies. It was also clear that forming strong collaborations between the banks and those alternative business finance sources is an essential part of getting the economy going.

Another legacy of the Bank's and BBA Business Finance Taskforce commitments, complementing the Better Business Finance initiative, is the Business Growth Fund (BGF). The Fund was established as an independent company and is sourced by five of the UK's major banks. It delivers equity finance to companies with turnovers of between £5 million and £100 million. The aim is to fill something of the gap between debt and equity in small and medium-sized business finance, rebalancing the funding burden on developing companies.

A connected financial environment supporting small business growth is essential. As the first BGF investments have been awarded, now is the time to work out how and where finance options can be interconnected and providers such as the BGF and Angels can work together as a collective to benefit UK business. That isn't only in terms of stumping up the finance. We have to make sure that are 'finance ready', with good propositions and detailed plans: more than anything else, this will encourage investor confidence.

Banks are open for business and there to lend. But banks aren't always the right finance.  When a company goes in search of support, it might be time to call on an equity financer or a Business Angel. The BBA and its members are committed to improving understanding of the options that are out there and exploring mutual opportunities to help companies grow. Knowing where everyone sits on the finance supply chain - what they offer and on what terms - will make it easier for customers to see where they fit into the national business model.