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Small businesses are less likely to access finance

Posted on: 30/07/2018

Research from the British Chambers of Commerce (BCC) and Wesleyan Bank reveals 56% of businesses have not attempted to access finance over the past year, due to limited investment intentions and weakening cash flow.

From the 1,100 UK firms that were surveyed, results confirmed that smaller companies are less likely to access finance than larger companies. According to the results, 63% of small firms with fewer than nine employees did not seek finance over the last year, compared to 39% of larger firms with 50 plus employees.

This research is backed up by data from Hadrians Wall Capital which revealed that SME lending from banks has fallen by 5.2% in the last year.

 Almost half of the businesses that have applied for funding in the past year did so because of cash flow, indicating that these firms are having difficulties trying to balance their books. Two fifths of these businesses report their cash flow as weak, with smaller firms more likely to describe their cash flow in this way than larger businesses.

For businesses that have remained optimistic about investing, their preferred sources of finance over the past year have been:

  • Overdrafts (18%)
  • Business loans (16%)
  • Asset finance (9%)
  • Crowdfunding, peer-to-peer or angel finance (4%)

It is clear that these findings reinforce the need to increase competition in banking; including promoting initiatives and increasing awareness of alternative finance options for small businesses, supporting them to achieve growth.

The proposal to expand SME access to the Finance Ombudsman Service would help boost the confidence of small businesses. Knowing they have official support to turn to if something goes wrong, may encourage smaller firms to apply for finance.

Businesses planning to invest over the next year, are focusing on incremental investment rather than big expansions in areas including:

  • Marketing and advertising (49%)
  • Staff training (48%)
  • IT and data security (45%)

It is clear that there is a need to kick-start greater levels of business investment; this will only happen by addressing the burden of upfront costs as well as other barriers holding firms from investing.

Through delivering contracts on behalf of the Government, our expect advisers support SMEs to achieve growth by providing guidance on accessing finance, as well as recommending finance options based on individual business goals. Before benefiting from the support provided by the Innovate 2 Succeed programme, 72% of our clients found access to fund barrier to achieving growth through innovation.

Find out more about how we support small businesses to continue to thrive.

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