SMEs offering most job possibilities

Most people have come to accept the fact that even during an economic boom most companies on the FTSE 100 don’t actively create domestic jobs. They are always facing pressure to make the greatest profits over the shortest term and this can lead to efficiency drives and companies thus reduce the number of jobs. In the modern world, many people are losing their jobs because technology can fill the gap.

Small and medium-sized companies are therefore left to help provide jobs and ultimately help rescue a failing economy. However, many of the small companies are not getting the access to finance that they need. In the past, the UK was known as being very friendly to small-business lending but over the last three decades the amount being provided has dropped significantly. Now, there is a drive to encourage a greater corporate debt market for smaller businesses.

Recently the Stuggart Exchange in Germany has benefited from bond issues which have been targeted at the mid-market. The French economy is also preparing to launch a bond structure which will allow smaller companies to access public debt markets.

These are two options that the UK could take to encourage lending and one of these is equity finance. The Alternative Investment Market, or AIM, was created so that smaller businesses could raise equity finance and since 1995, when it was founded, it has been immensely successful in doing this.

Many of the companies in the market who were not successful have collapsed and this has left the AIM with a good selection of high-quality investment opportunities. A market even smaller than the AIM is PLUS and this is another place that very small businesses can raise equity finance.

Since 2008 initial public offerings have suffered significantly and this has caused a new equity trading platform targeted at small and medium-sized companies to open in the UK. The platform is known as GXG Markets and it is regulated by a Danish financial services company. The market is fully regulated, much like the London Stock Exchange, and allows investors, professionals, and people with a high net worth to invest in the exchanges companies.

The biggest difference with GXG when compared with its larger counterparts is that it is based on matched bargain trading. Marketing for the new exchange highlights the problem of large spreads which increase in an inversely proportional way to the amount of stock is traded. The new trading system has removed this need for price transactions to be set and there is faster reporting.

GXG targets company smaller than those on the AIM and therefore positioned itself as a market for venture capital. The amount of venture capital that can be raised without having to produce an approved prospectus has just risen to €5 million.

For many companies having a quote on GXG will be attractive in the early stage of pushing through a deal. This is the first time in a while setting matched bargain system has been launched and should be attractive to companies in challenging financial times.