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Three fifths of start-ups rejected for bank loans

15/09/2014

An overwhelming three fifths of start-ups were rejected for traditional forms of funding in the last two years, according to new figures.

The research, conducted by UK business angel network, Angels Den, showed that 59% of British entrepreneurs that have launched small businesses in the last two years had tried and failed to successfully obtain financial investment in the form of traditional bank loans.

The most common reasons the entrepreneurs gave for rejection were unrealistic financial predictions (32%), and lack of business experience (28%). Other reasons banks had declined start-ups for funding included their age (16%) and poor credit rating (9%).

Unable to access loans, more than half (58%) of entrepreneurs surveyed opted to use a combination of savings and money borrowed from family and friends to get their venture up and running.

Bill Morrow, co-founder and director of Angels Den, said: “Unfortunately, it is all too often the case these days that promising start-ups with an excellent service or product to promote fall at the last hurdle, whilst trying to secure traditional investment.”

But while traditional lending has been increasingly difficult to obtain, asset based lending has reached record highs.

The three months to the end of June 2014 was the biggest ever quarter for asset based finance, with a record £18.9 billion of funding provided to businesses, according to the Asset Based Finance Association (ABFA), the body representing the asset based finance industry.

With 82% of its clients turning over less than £5 million, this shows that flexible funding options are readily available for start ups and small businesses without having to turn to their family and friends.

Download our ultimate guide to business finance for start-ups to explore popular funding solutions for new businesses.

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