Our research suggests fast-growing companies are prepared to explore a wide range of options to finance their futures
Fast-growing companies require sound finances if they are to continue on their current trajectories. It will not be possible to secure further growth without building on solid financial foundations. And in many cases, fast-growing companies will want to take on additional finance to support their growth plans.
Overall, they are more likely to take on debt than to be self-funding, but this view is far from universally shared. In particular, many businesses are open to the idea of taking on equity-based investment from private equity (PE) and venture capital (VC). Others see the public markets as a potentially exciting funding route.
On debt, more than nine in 10 fast-growing companies (92%) say they have taken on this form of finance over the past three years, while even greater numbers (95%) expect to take on borrowing over the next three years. Businesses are roughly twice as likely to see debt as their most important source of funding for growth as any other type of finance.
Nevertheless, PE or VC finance will be crucial to many fast-growing businesses in the years ahead. Almost half (41%) anticipate at least partially funding their future growth through PE or VC, while one in five (21%) say this will be their most important type of finance.
PE and VC financing also looks set to become a significantly more important source of finance in the future, with many fast-growing companies now looking for broader support than just funding as they plot the next stage in their scale-up journey. While only 2% of the businesses in this research have received PE or VC funding in the past, 27% expect to do so in the future. This could be an important source of business support, ranging from mentoring to crucial introductions to new clients.
An initial public offering (IPO) is also a possibility for a minority of the fast-growing companies in this research. To date, only 7% of these businesses have raised funding via an IPO and many fast-growing companies have reservations about issues such as compliance and control.
Still, as these companies continue to grow, more may explore this option. The experience of those fast-growing businesses that have been down this route already provides inspiration – well-over three-quarters (82%) say going public has proved to be an important driver of their continued growth.
In practice, many fast-growing businesses will explore several options for funding – and may seek to raise both debt and equity finance. Their focus will be on the funding solutions that maximise their ability to take advantage of further growth opportunities and to achieve their potential.