David Prosser: No better time for SMEs to issue own debt

Small Talk

The CBI's new guide to innovative sources of finance for small businesses struggling to raise cash features no fewer than 15 separate alternatives to bank debt; it has already won support from Business Minister Vince Cable, who is desperate to diversify the UKs SME funding ecosystem.

But there is a tacit message in the guide: that small businesses should take responsibility themselves for finding funding where they can.

As the CBI itself points out, one under-utilised potential source of finance is the retail bond sector but there is nothing to prevent small businesses issuing debt for themselves.

In Germany, small companies self-issued bonds worth more than €1.9bn over the year to the end of March, with each one raising an average of €35m (£30m). There is no comparable data for the UK, but the equivalent figure would be pretty close to zero. It's difficult to understand why that should be, given that the small number of British SMEs that have in the past self-issued bonds have had great success.

For example, three years ago, Hotel Chocolat raised £4m of finance after offering investors the opportunity to put up to £4,000 into bonds it issued.

A bond issue by Ecotricity, the alternative energy business, was even more successful – it raised £10m in 2011 by offering investors an annual yield worth 6 per cent (or 6.5 per cent for investors who were also its customers) and was 50 per cent oversubscribed.

Leon, the restaurant chain, managed to pick up £1.5m last year through a similar scheme while the Scottish brewer Brewdog managed to raise £2.2m through a direct appeal to equity investors in 2011. Almost 6,000 subscribed in the business.

The self-issue bond market has the potential to generate much larger sums than have been raised by the handful of issues seen so far. How, though, to kickstart it?

One option would be for the Government to offer the kind of support to investors in small companies' bonds as it extends to investors in their equity. Initiatives such as the Enterprise Investment Scheme and the Seed Enterprise Investment Scheme reward investors who put money into the stock of SMEs.

Why shouldn't investors who put up debt for these businesses also get a bit of encouragement?

Small Businessman of the Week: Adam Landau, director, DeVono Property

I was one of three founders who launched DeVono 10 years ago this October. We'd all worked in smaller property firms and become frustrated with their conflicts of interest – their priority is always the landlord so we felt there was an opportunity for a business that only represented tenants.

In the London market where we operate, even a small firm negotiating a lease over, say, five years, is facing a multi-million pound liability, so it's important they get advice on the transaction.

Many SMEs are getting a raw deal from the London property market. Landlords' agents talk up the lack of availability of space because it's in their interests to do so and clients who don't have representation have no way of challenging agents' claims about who is paying what for comparable property.

Our turnover is now running at £2.5m a year and we've been profitable in every year since we incorporated. We've acquired more offices for companies in London in each of the past six years and we now have a project management operation helping tenants move, and a retail arm that helps clients such as Topps Tiles and Domino's Pizza with multiple sites. We also have close relationships with several firms in Europe.

Competition: Techies can win £1m funding to go solo

Calling young technology entrepreneurs. The organisers of the Digital Shoreditch festival have teamed up with a consortium, including City University, the crowdfunding platform Seedrs and accountants KPMG, to launch Million Pound Startup – a contest that rewards the winner with £1m of investment funding.

The promoters will find a company with the potential to grow into a £100m London-based technology business. The winner will get mentoring support as well as finance. The competition is open to technology businesses with a turnover of less than £1m a year after less than 10 years' trading. Closing date is 29 August. For full details, see millionpoundstartup.com

Life and Style
A teenager boy wakes up.
life
Life and Style
It is believed that historically rising rates of alcohol consumption have contributed to the increase
food + drink
Voices
The erotic novel Fifty Shades of Grey has already been blamed for a rise in the number of callouts to the fire brigade for people trapped in handcuffs
voicesJustine Elyot: Since Fifty Shades there's no need to be secretive about it — everyone's at it
Arts and Entertainment
Critics say Kipling showed loathing for India's primitive villagers in The Jungle Book
filmChristopher Walken, Bill Murray, Scarlett Johanssen Idris Elba, Andy Serkis, Benedict Cumberbatch, Cate Blanchett and Christian Bale
PROMOTED VIDEO
Life and Style
Playing to win: for Tanith Carey, pictured with Lily, right, and Clio, even simple games had to have an educational purpose
lifeTanith Carey explains what made her take her foot off the gas
Arts and Entertainment
The White Sails Hospital and Spa is to be built in the new Tunisia Economic City.
architectureRussian billionaire designs boat-shaped hospital for new Dubai-style Tunisia Economic City
Arts and Entertainment
You could be in the Glastonbury crowd next summer if you follow our tips for bagging tickets this week
music
Sport
Husain Abdullah returns an interception off Tom Brady for a touchdown
nflLeague has rules against 'sliding to ground on knees'
Life and Style
tech
Extras
indybest
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

SQL Developer (Stored Procedures) - Hertfordshire/Middlesex

£300 - £330 per day: Ashdown Group: SQL Developer (Stored Procedures) Watford...

Day In a Page

Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?
Royal Ballet star dubbed 'Charlize Theron in pointe shoes' takes on Manon

Homegrown ballerina is on the rise

Royal Ballet star Melissa Hamilton is about to tackle the role of Manon
Education, eduction, education? Our growing fascination with what really goes on in school

Education, education, education

TV documentaries filmed in classrooms are now a genre in their own right
It’s reasonable to negotiate with the likes of Isis, so why don’t we do it and save lives?

It’s perfectly reasonable to negotiate with villains like Isis

So why don’t we do it and save some lives?
This man just ran a marathon in under 2 hours 3 minutes. Is a 2-hour race in sight?

Is a sub-2-hour race now within sight?

Dennis Kimetto breaks marathon record
We shall not be moved, say Stratford's single parents fighting eviction

Inside the E15 'occupation'

We shall not be moved, say Stratford single parents
Air strikes alone will fail to stop Isis

Air strikes alone will fail to stop Isis

Talks between all touched by the crisis in Syria and Iraq can achieve as much as the Tornadoes, says Patrick Cockburn
Nadhim Zahawi: From a refugee on welfare to the heart of No 10

Nadhim Zahawi: From a refugee on welfare to the heart of No 10

The Tory MP speaks for the first time about the devastating effect of his father's bankruptcy
Witches: A history of misogyny

Witches: A history of misogyny

The sexist abuse that haunts modern life is nothing new: women have been 'trolled' in art for 500 years
Shona Rhimes interview: Meet the most powerful woman in US television

Meet the most powerful woman in US television

Writer and producer of shows like Grey's Anatomy, Shonda Rhimes now has her own evening of primetime TV – but she’s taking it in her stride
'Before They Pass Away': Endangered communities photographed 'like Kate Moss'

Endangered communities photographed 'like Kate Moss'

Jimmy Nelson travelled the world to photograph 35 threatened tribes in an unashamedly glamorous style