25th October 2011

Small and medium-sized enterprises (SMEs) are pivotal to the success of the UK economy. According to Government statistics, SMEs account for 59% of private sector employment and almost half of commercial turnover. In short, SMEs are vital in terms of job and wealth creation.

Seeded within the SME sector are the economic giants of tomorrow. These are the companies that are not only trading successfully, but also growing rapidly. Such star performers have the potential to become major players in their industries, employing perhaps not just tens or hundreds of people but thousands as their businesses expand. Santander’s Breakthrough programme is designed to help businesses like these fulfil their potential.

Who is the Breakthrough programme aimed at?

The Breakthrough programme is aimed at businesses that have advanced well beyond the start-up stage to achieve a turnover of between £500,000 and £50 million per annum while posting growth of 20% or more in turnover, profit or employment.

Ironically, it is entrepreneurial companies like these, led by strong, ambitious management teams and underpinned by carefully considered growth strategies, that most often struggle when it comes to accessing funding and resources. Those of you who have led companies through a period of expansion will know that ramping up capacity, building market share and breaking into new markets usually requires not only financial support but also knowledge and skills that may not be available within your organisation. And here’s where the Breakthrough programme comes in.

Under this initiative, Santander seeks to identify and support successful, fast-growth SMEs as they work to break through to the next level. Funding is an important part of the package. Over the next few years, we aim to make £200 million available for investment in businesses that we see as ‘Growth Champions’. We will also ensure that any company selected for the programme will have access to some of the best advice and talent available, including businesspeople who have already established their own companies as market leaders on a national and global stage.

What does this mean in practice?

All companies selected to take part in the Breakthrough programme will have access to our Growth Capital team to discuss how best to support their aspirations. Although managed at a divisional level by Santander, the selection of our Growth Champions will be made in collaboration with universities, successful entrepreneurs and with business intelligence provider Experian. Our selection criteria are exacting. We’re looking for the very best businesses in each region, regardless of their current banking partner. The growth capital loan facility is a vital component of the scheme as a whole. Essentially, we aim to help SMEs plug the funding gap.

According to the recently published report led by former 3i executive Chris Rowlands, The Provision of Growth Capital to UK Small and Medium Sized Enterprises, as many as 5,000 SMEs currently require growth capital, with businesses needing sums between £2-10 million among those struggling the most. The report cites several reasons for this. Venture capital and private equity funds rarely consider investments of less than £10 million, while funding from business angels is difficult for amounts above £2 million. Elsewhere, even fast-growth companies may feel that debt finance in the form of a conventional term loan would be too great a drain on their finances. Recognising these difficulties, Santander is making finance available in the form of a subordinated growth capital loan, structured to minimise the impact on cashflow.

Matching ambition with experience

Funding alone won’t take a business to the next level. Every fast-growing venture undergoes a development cycle that challenges existing managers. In a typical scenario, a start-up business may flourish on the back of the founder’s sales acumen and market knowledge. However, as the business grows, the venture becomes a much more complex entity, requiring new skills in areas such as financial management, credit control, marketing, sales and HR. All of this can be bought in as the business grows, all under the watchful eye of the founder.

But there is a point on the growth curve where the task of taking the business forward requires knowledge and insight that may not be readily available. For instance, lack of knowledge, coupled with fears of entering an unfamiliar and potentially risky environment, can deter even the most ambitious entrepreneurs from entering potentially lucrative overseas export markets.

The Breakthrough programme is designed to provide fast-growth companies with the resources and knowledge they need to push towards the next level of growth. Businesses that receive funding through the Breakthrough programme will have first call on a series of groundbreaking initiatives, which include:

Masterclasses – Kicking off with a visit to Google, the ‘Masterclass’ initiative enables our Breakthrough companies to pay an onsite visit to and learn from entrepreneurs and managers who are further along the growth cycle. It’s an opportunity to see and hear first-hand how successful companies have got where they are today.

International – Moving into overseas markets can be daunting. Working in collaboration with UK Trade & Investment, we will take selected delegates on fact-finding trips overseas. These trade missions are a chance to both map out the market and make useful contacts.

Live events – We will organise two events per region. Open to selected fast-growth companies (not just those on the Breakthrough programme), these sessions aim to help businesses address the issues that impair growth while simultaneously learning lessons from market-leading companies.

Internships – Attracting talent can be a constant headache for SMEs, particularly those working in sectors where highly skilled people are required. For instance, graduates and other sought-after professionals know that working for a small company can offer unique rewards, but the relatively low visibility of SMEs means that matching skills to a company isn’t always easy. Our Internship initiative addresses this issue by matching top-flight graduates with companies that could benefit from their skills. For the graduate, it offers real work experience within exciting companies. For the business, it’s a chance to tap into fresh thinking and perhaps create a permanent relationship.

Growing responsibly – Viewed as a whole, Breakthrough is more than just a funding programme. It provides a means of delivering people and knowledge to businesses that actively benefit their communities. With a corporate social responsibility initiative also available in the package, businesses will have the opportunity to create community links while also gaining a deeper understanding of sustainability issues.

(Taking part in the Breakthrough programme does not guarantee access to all these elements; the programme is tailored to meet the individual requirements of each business.)

If the UK economy is to rebalance towards sustainable, private sector-led expansion, it’s essential that fast-growth SMEs be enabled to fulfil their potential. If your company fits the bill, Breakthrough could enable you to move forward. We have already begun conversations with companies identified as having Breakthrough potential. If you think your company meets our growth criteria, now is the time to get in touch.