About the technology sector
The technology sector is made up of businesses involved in the provision of technologically based goods or services. This includes the following:
- Semiconductor manufacturers
- Communications equipment
- Computer hardware
- Technology consulting
- IT managed services
Our experience tells us
Many technology hardware industries have strong competition, which has driven prices down and imposed more modest profit margins. However, the sector as a whole is growing; TechNation’s 2018 report found that the tech sector had grown by 8.2% between 2016 and 2017 (up from £170bn to £184bn). Specific challenges for hardware manufacturers relate to the need for high capex (Capital Expenditure) early on. Adequate financing is therefore a key consideration.
What we'd usually recommend
The main concern for many tech businesses is the availability of cash — both from the outset and during the course of business. They often require a large amount of capital in order to purchase the equipment they need to produce their product or service. When funding isn't available, we recommend banks or alternative financiers. Many high street banks, like HSBC, have specific funds ring-fenced for SMEs.
Alternatively, companies such as Funding Circle offer fast and competitive business loans up to £0.5m through their P2P funding service. You can also remedy cash flow constraints using invoice financing, a well-known service offered by high street banks (amongst others), which enables businesses to sell (factor) their debt ledger to receive cash up front. In both cases, company directors should ensure their business can meet the terms of repayment.