Realising growth ambitions in the waste sector

Written by: Geraldine Faulkner | Published:

Funding growth through equity investment doesn’t mean giving up control, says Richard Taylor, investment director at BGF.

BGF recently invested £7.5m in Teesside-based recycling company, J&B Recycling and became a long term minority partner in the business. The investment will be used for the development of a new recycling plant, and an expansion of the company's existing facilities.

Our investment is part of a broader trend we're seeing in the small and mid-sized business community, which is a return to equity as a source of capital.

For the first time in a long period, Britain's most ambitious entrepreneurs are starting to seriously consider what funding options, outside of bank debt, are available to them - and why.

We're seeing this trend play out in the uplift in peer-to-peer lending and crowd funding as well as the rising interest in growth capital.

In fact, during the first nine months of the year, more than 600 companies collectively raised £1.62bn of equity capital. Compare this to 2011 when, for the entire year, the number amounted to £1.09bn.

There are three factors driving this change.

Firstly, the confidence of entrepreneurs to implement growth plans has increased as a result of more favourable economic conditions.

And recognising the contribution they make to the UK economy (two thirds of all new jobs are created by small and mid-sized businesses), politicians and the media have taken a keener and more active interest in the sector.

Secondly, more capital is available, and BGF is a case in point.

We were set up in 2011 with £2.5bn to invest as long term capital in high growth companies, and as a solution to the reduction in bank lending.

Thirdly, there's a growing awareness that not many lasting successes are created, or can be sustained, on debt alone: healthy businesses should be adequately capitalised.

It isn't about debt or equity exclusively, but it is about trying to achieve the right balance of both, with debt used for day-to-day financial management, and equity used to fund growth.

These three factors combined are slowly creating an environment where more support and assistance is available to high growth businesses.

Importantly, this cuts across all sectors - the UK's recycling and waste management sector, and related services, included.

Regulatory targets and an increasingly environmentally conscious public mean that there are long term opportunities and plenty of areas that remain unexploited.

Understanding what funding options are available, and which are best suited to a company and its risk profile, is the first step to realising growth ambitions.

And this can only be a good thing for the prospects of British business.


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