Is the SME funding gap getting wider?
Although the amount of choice regarding how to fund your business may have increased, the volume of lending to SMEs has decreased by 3% since 2015. And while there are encouraging signs regarding awareness of funding options, there is more that can be done to support the UK’s small businesses.
In the UK, SMEs make up around 98% of the private sector, employ 60% of private sector workers and contribute roughly £1.9 trillion towards the economy each year.
However, for more than a decade, there has been debate regarding the availability of traditional funding opportunities for these businesses.
In 2016, findings showed that half of SMEs who approached their bank for funding and were unsuccessful took no further action. The head of the British Business Bank (BBB) then called for more work to be done to bridge the gap between traditional and alternative finance.
However, statistics from last year showed a slight drop in the percentage of businesses successfully obtaining all the finance they needed since 2016, and worryingly, 49% of those that did not receive the full amount required either gave up, cancelled their plans or put plans on hold.
One promising change, however, was in the awareness of the different types of finance available, with 80% of businesses now aware of hire purchase, 70% aware of crowdfunding platforms and 52% aware of P2P lending.
It was revealed that when researching finance options, 33% of SMEs went directly to their main bank, and a further 14% simply turned to the internet. This could give an explanation as to why many businesses didn’t pursue different options when they were unsuccessful in receiving the full amount of funding.
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Whilst researching funding options online can help businesses to get a better understanding of the products available, with so many solutions to choose from this could be restricting knowledge of what the sector has to offer.
Plus, every business is different and what might work for one company isn’t necessarily the best option for another.
Talking to someone with experience in the commercial finance industry can be a much better way to gain a wide view of your options, whether that’s your bank or an independent finance broker like Hilton-Baird.
Our team will listen to your business’s goals and help you to source the most suitable product on the market and ensure that it continues to work for you over the long term.