In response to reports indicating a 10% increase in government funding for small and medium-sized enterprises (SMEs) in 2024, investors are increasingly directing their focus towards the potential of these nimble and innovative businesses, recognised for their pivotal role in driving growth and innovation.

Citing a recent report by the Cottons Group, Forecasting the landscape for UK SMEs in 2024, according to the Department for International Trade (DIT), the UK government’s dedication to assisting SMEs is evident through expanded funding initiatives. In 2023, SMEs secured £3.5 billion in grants and loans, and there are anticipations of an additional 10% increase in funding availability for the year 2024.

Oxford Capital’s investment experts have weighed in on why investors should consider SMEs in the upcoming year. Mark Bower-Easton, a spokesperson for Oxford Capital, emphasises the unique qualities that SMEs bring to the investment landscape.

“As we enter 2024, investors are recognising the potential that SMEs offer. Their ability to embody innovation and agility makes them strategic investments in our ever-evolving market. It’s not just about financial gain; it’s about believing in the growth and potential of small businesses to thrive,” states Bower-Easton.

The investment playbook suggested by Oxford Capital revolves around strategic diversification, a focus on innovation, diligent research, and patience for growth. Bower-Easton advises investors not to underestimate the potential of SMEs, highlighting their unique blend of innovation, adaptability, and growth potential.

Key reasons to consider SMEs in 2024:

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  1. Innovation and Potential: SMEs, characterised by their compact size, facilitate agile decision-making and experimentation, acting as a breeding ground for innovation and technological breakthroughs. While larger corporations often dominate the spotlight, SMEs represent untapped potential, offering a unique opportunity for early-stage investment and potential substantial returns.
  2. Flexibility and Adaptability: The dynamic nature of SMEs allows for swift adaptation to evolving market conditions, making them resilient in changing environments. Investing in SMEs contributes to portfolio diversification, mitigating risks associated with uncertainties in the business landscape.
  3. Local Impact with Global Reach: Beyond financial gains, supporting SMEs contributes to positive impacts on local economies, job creation, and community development. Investing strategically in SMEs aligns with building a diversified portfolio, providing a shield against economic downturns or industry-specific challenges.

Oxford Capital highlights the importance of thorough research when investing in SMEs, including assessments of business models, financial health, and leadership. Building relationships within the SME ecosystem, scrutinising financial statements, understanding industry dynamics, and ensuring legal compliance are essential components of a successful SME investment strategy.