Amid a financing drought, should business leaders bet on debt or dilute with equity? Himanshu Singh gives us his take

Nearly half of UK SMEs have paused trading in the last two years as they become victims of a financing drought at the very moment growth is most needed. With £20bn-25bn in corporate refinancing looming by 2027, and the Bank of England’s base rate stubbornly at four per cent, business leaders face a pressing capital conundrum: should they bet on debt or dilute with equity?

The funding crisis deepens

The stark reality facing UK businesses has intensified significantly. Series A funding has plummeted to a seven-year low of £2.4bn, representing a £500m drop from previous years. This dramatic decline means only one in 14 startups now successfully progress from seed to Series A funding, compared to one in four in 2021.

The broader SME landscape reveals equally concerning trends. Only 43 per cent of SMEs now use external finance, down from 50 per cent in Q3 2023, while 75 per cent of small businesses have never secured external funding. Perhaps most telling, over half of the UK SME owners have resorted to personal loans to fund their businesses due to difficulties accessing traditional capital.

The case for debt:........

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