Chairman Clifton Asset Management
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Small business funding: A new regional powerhouse

26th Mar 2019
Financial graph on technology abstract background

We have seen the rise of various forms of alternative funding for SMEs over the last decade, but more recently there has been little to shout about which is genuinely new and innovative.

In my view, both peer-to-peer and pension-led funding were real groundbreakers and both have gone on to become pretty mainstream, providing millions, or even billions in funding to small businesses. Aside from these two great products, there has been little in the way of real innovation in the space for a very long time.

Then up stepped Justin Urquhart-Stewart and his colleagues at Regionally. At last the potential for real innovation and a vision that delivers an elegant solution to an underserved market sector.

Like Justin, I have long held the view that the old system of regional stock exchanges served the local business community far better than one huge London-based exchange (AIM notwithstanding). This is why Justin, together with his teammates Karl Straw and Thomas Coles is launching a business called Regionally, which is effectively a hybrid stock exchange and private equity club where regional businesses can access regional investors through a standardised application and due diligence process.

As all potential investors are sophisticated and high net worth, the process of seeking investment is driven by an information memorandum, therefore saving considerable time and cost.

Using this model, they anticipate they will be able to deliver funding within eight weeks, from the start of the process to money in the bank, at a fraction of the cost of a regular listing and suggest a far higher success rate than the typical corporate finance/private equity route.

Personally, I’m looking forward to seeing Regionally in action as the idea of regional investors funding regional business backed by a strong technology platform and a degree of share liquidity (always a problem in junior exchanges) does make a great deal of sense.

Likewise, I think accountants across the South West (where Regionally will first launch) will be excited by the opportunity to support their clients with a locally-based funding solution that can deliver, in a relatively short timeframe, fast growth to clients that often find it difficult to access equity or debt finance to achieve their full potential.

Regionally are targeting businesses seeking to raise £250,000 to £10m, that are profitable and can demonstrate a management track record. These businesses are likely to be of the size and stature of those firms which have had a long-term relationship with their accountant and view them very much as their trusted adviser.

I would, therefore, urge that accountants visit the Regionally website to familiarise themselves with how this private investment exchange operates, and how it could potentially support their clients.

Furthermore, I think that it is a sensible decision by the company to target businesses looking to raise under £10m as the cost of an AIM listing is likely to be half a million pounds or so, rendering it unfeasible for most businesses looking for these sorts of amounts. With AIM out of the equation, really the only choice for the business owner (debt aside) is private equity or venture capital, both of which can end up with a significant loss of control over one’s own business.

Interestingly, Regionally intend to list bonds as well, meaning that the raising of long-term structured debt is also an option. This is particularly attractive to businesses looking to make acquisitions that generate strong short-term cash flow gains and whose goal is to limit dilution of equity.

Launching initially in the South West with a focus on Bristol and Exeter, Regionally plan to roll out across the UK over the coming months and years. It is my belief that this model will, in time, be a significant contributor to SME finance and thus to the economy as a whole.

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