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AIB report: 62% of businesses are ‘not familiar with equity finance’

Most Irish SMEs rely on traditional forms of finance to grow their business, despite a large increase in the availability of alternative sources of capital for SMEs at all stages of their development, according to a new research report, ‘Equity Finance – The Irish Equity Challenge’ published February 2018 . The research, by Ipsos MRBI for AIB, finds that 71% of those surveyed said they were partly financed by the reinvestment of profits from the business, while 56% also relied on traditional bank debt in the form of a business loan or overdraft.
The majority of SMEs surveyed are forecasting growth, however 20% reported that future access to finance was a factor in limiting the potential of their growth, while 24% of respondents cited economic factors as a potentially limiting factor. Just 1% of the SMEs surveyed secured investment from either a venture capital firm or an equity firm to help them grow and expand. Of the 70% of companies that had no wish to use equity finance, 77% cited the possible loss of control of their business as a deterrent, while 69% said that they preferred debt finance. Furthermore, six out of ten (61%) believed they would have to sell some or all of the business in order to pay back the equity investor while 60% believed that maintaining ownership was more important than achieving growth.