World Economy

SMEs in UK Discontented by Lack of Funding

Only 4% of SMEs say they have used P2P lending.Only 4% of SMEs say they have used P2P lending.

A new report has claimed that one in four small businesses in Britain have been turned down for growth funding, with a significant number reporting serious dissatisfaction with the service offered by their bank.

The Close Brothers SME funding report shows that, of those who had applied for finance and were refused, 18% said they would have used the money to start their business, while 24% said they would have used the money to help their existing business to grow, SME Insider reported.

Close Brothers said: “This worrying trend of lenders not putting their faith in early stage SMEs looking to grow, due to a lack of capital or cash flow, may well be stifling growth, having a knock-on effect on the wider economy in the long-term.”

However, for all the talk of crowd-funding stepping into the breach, only 4% of SMEs say they have used peer-to-peer (P2P) lending, with around 75% saying they still felt that bank loans are the suitable way for them to get finance.

Adrian Sainsbury, chief executive of the Close Brothers commercial division, said: “When starting a business, a great deal of time and energy is spent on planning and developing strategies to establish and maintain a place in the market.

“However, once up and running, it’s very easy to focus on ‘business as usual’ and this can often adversely impact on opportunities to expand and grow the business. Longer term planning is essential to maximize potential future success’.”

Rob Straathof, CEO of Liberis, agreed that more is needed to be done. “Small businesses are the lifeblood of the UK economy, but too often they’re held back by the complicated and cumbersome finance process of the major providers,” he said.

“This can see SMEs rejected based on how long they’ve been in business or whether they fit the bank’s own specific model, not down to their credit rating or the value of their business model. If this isn’t resolved the great gains that small businesses, start-ups and the self-employed have made over the last few years could be put at risk. The Treasury’s new Bank Referral Scheme is a welcome step in the right direction and means SMEs can go forward with confidence.”

 Referral Scheme

Adrian Sainsbury reported that more SMEs are turning to lenders for advice in the wake of the referendum, which should better prepare them for when the full implications of the UK’s Brexit deal are known.

Introduction of the Banking Referral Scheme, however, may give smaller business an opportunity to access more finance options.

He said: “Historically SMEs have not always found it easy to source the appropriate funding required to sustain or grow their businesses, but times have changed.

“The recently announced government initiative means that in the near future high street banks will be required to offer a referral to any SMEs they turn down for finance, and that’s a positive and purposeful step both for businesses and the economy.”

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