Sources of financefamily-type businesses and/or those established as a result of management buy-outs
and buy-ins. AIM has proved to be a very successful means for businesses to establish
a market in which new equity finance could be raised and its shares could be traded.
As such, it can provide a means for equity investors, including venture capitalists and
business angels, to ‘exit’ from their investments. Obtaining an AIM listing, and raising
funds, costs the typical business about £500,000. Businesses listed on AIM tend to have
market values in the range £1 million to £250 million, although most fall within the
£5 million to £50 million range. Businesses currently listed on AIM include the wine
retailer Majestic Wine plc, the restaurant business Domino’s Pizza plc, and the football
clubs Millwalland Preston North End.
AIM was intended to be cheap to enter, compared with the costs of obtaining a
full Stock Exchange listing. At 31 August 2007 there were 1,653 businesses listed on
AIM.PLUS
As a result of the high costs of a full or AIM listing, a new market, PLUS (formerly
known as ‘Ofex’) was established by stockbrokers J. P. Jenkins Ltd in 1997, but is now
operated by PLUS Markets Group plc – itself a business listed on AIM.
PLUS is entirely independent of the Stock Exchange, and the costs and rigours of
obtaining a listing and raising finance are very low. There are currently over 200 busi-
nesses listed on PLUS, including such household names as Arsenaland Rangersfoot-
ball clubs, and brewers Adnams plcand Shepherd Neame Ltd.Going public
For the typical small business, the size of the step that needs to be taken in ‘going
public’ (obtaining a Stock Exchange listing, or even an AIM one) should not be under-
estimated. Obtaining a listing means moving into a ‘higher league’ in various ways.
The following factors are likely to be important:l Strict rules are imposed on listed businesses, including requiring additional
levels of financial disclosure to that already imposed by law and by International
Accounting Standards (for example, the listing rules require that half-yearly finan-
cial reports must be published).
l Financial analysts, financial journalists and others closely monitor the activities of
listed businesses. Such scrutiny may not be welcome, particularly if the business is
dealing with sensitive issues or is experiencing operational problems.
l The costs of obtaining a listing are vast and this may be a real deterrent for some
businesses.Evidence on small business financing
Figure 16.2 shows the sources of finance for small UK businesses over recent years.
It is striking what a small proportion of the funding comes from the owners (5 per
cent). Bank financing accounts for the majority of finance. Of the bank finance, about
three-quarters comes from term loans and the other quarter from overdrafts. Although
venture capital is undoubtedly an important source of finance for some businesses,
overall it is relatively insignificant (3 per cent).