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Rowlands Growth Capital Review


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Rowlands Growth Capital Review

  1. 1. Rowlands Growth Capital Review: Call for evidence INTRODUCTION The Rowlands Growth Capital Review is to examine whether Government will need to intervene to help Small and Medium businesses (SMEs) access capital for business growth and will be led by venture capital expert Christopher Rowlands. The review will determine if any intervention, including a modern-day version of Industrial and Commercial Finance Corporation/3i, is required to ensure small and medium sized firms (SMEs) with good growth potential have access to the capital they need to take advantage of the economic upturn. This review will consider the demand for, and availability of, long term finance (either debt, equity or quasi equity) to fund growth. The businesses that this review wishes to focus on are established SMEs that are cash generating and have good growth prospects with, as minimum, steady financial returns. These firms will be seeking this type of finance to enhance long term growth rather than to alleviate financial distress. The scope of the review excludes the financing of higher risk investments such as business start-ups, spin-outs or VC- appropriate businesses. Over the course of the project, the review team will reflect on views gathered from a wide range of stakeholders: banks, private equity and venture capitalists; private and institutional investors; industry representatives; the academic and research community; government agencies; regional bodies; and small and medium sized businesses and their representative organisations. ABOUT THIS DOCUMENT This document sets out the issues on which the Review team would particularly welcome responses. The objectives for this call for evidence are to: • Provide evidence that the Review team can use to develop its analysis and • Highlight issues on which the Review should focus its attention, shaping the direction that the Review takes over the forthcoming months. The Review would like to issue an open ‘call for evidence’ to help gain a full and representative understanding of the environment for raising finance and likely issues. Not all questions will be relevant to all respondents – please feel free to skip questions that are not relevant to you. We very much look forward to receiving your responses. Submissions should be sent to the Rowlands Growth Capital Review by 17th July 2009: or Rowlands Growth Capital Review Zone 190 Department of Business, Innovation and Skills 1 Victoria Street London SW1H OET
  2. 2. The Review’s conclusions will be rooted in evidence from a range of sources, including quantitative data; surveys and views of representative groups; visits and seminars; as well as interviews and individual case studies.
  3. 3. CALL FOR EVIDENCE Market provision of growth finance for SMEs has, over the last 10 years, primarily been through easily available bank debt on the one hand and highly leveraged equity on the other. Furthermore, experience of fundraising immediately after previous recessions shows us that access to longer term risk capital is most difficult as the economy begins to pick up. This is also the time that demand for growth finance will increase significantly. Long term risk finance is often priced at a level higher than shorter term sources of debt and is therefore more suitable to debt/equity or equity funding. Q1: Is there is a failure in the supply of long term finance to support the growth of SMEs? Does the suitability of different types of finance vary for different categories of business growth? Please outline your definition of ‘SME’ in this context. Q2: If there is a failure, what is its scale and nature and which type of SMEs does it affect? Q3: What is the level of demand amongst SMEs for additional long term capital for growth, as opposed to shorter term, flexible and available capital? If there is demand, what are acceptable costs of raising such capital and the appropriate return i.e. is dilution of equity acceptable? What evidence would you cite in support of this view? Q4: If a financing gap exists, is there a range in the size of investments or risk:return profile of investment that is particularly difficult to obtain; at what level is this and why? Q5: Is there a difference across regions in the ease with which SMEs can access the appropriate type of long term growth capital, and if so why? Q6: Is private capital available and willing to be invested in SME Growth Capital asset class? What would the minimum return expectations be? Q7: Should Government seek to intervene in this market, and if so, what are the policy options and measures for doing so? Q8: What would be the appropriate approach to the delivery of any Government interventions for meeting this objective? HOW TO SUBMIT YOUR RESPONSE The review welcomes responses to the issues and questions raised in this paper by 17th July. However, it will consider responses after this date. In order to ensure that your submission is given appropriate consideration, please ensure that the number of the questions to which you are responding is clearly stated. We would prefer electronic submissions where possible. Responses should be sent to: Alternatively, postal submissions can be sent to: Rowlands Growth Capital Review Bay 190
  4. 4. Department of Business, Innovation and Skills 1 Victoria Street London SW1H OET A coversheet for responses has been included for your convenience at the end of this document. Please include the name and contact details of the person to contact for any follow-up discussions.
  5. 5. COVER SHEET FOR RESPONDENTS Contact details of respondent Name Job title Organisation Postal address Telephone number(s) Email address Questions Response provided Details of any accompanying documents 1 2 3 4 5 6 7 8 Type of organisation: please tick all boxes that apply. T Private sector T Bank T Accountant / Advisory T Public sector T Private Equity T Academic/research T Regional T Venture Capital T Government agency T Business/Employer T Voluntary sector r Business Angel representative r Replying as individual r Institutional Investor r Private Investor r Other, please state