Lack of alternative funding options hindering SME prospects
New findings from Close Brothers’ quarterly Business Barometer, which identifies the priorities of small and medium businesses (SMEs) in the UK, reveals SMEs are in need of different funding options to achieve their potential. Despite recent reports that overall funding levels are continuing to rise, the research found that nearly seven in ten (69%) believe they would benefit from additional sources of finance.
The research also revealed SMEs face barriers when trying to access the right financing options. In particular, just under one in five (19%) state there is too much red tape involved in financing their business, and 14% say they don’t have sufficient collateral to get the loans they want.
Additionally, the research underlined the current information gap faced by many SMEs around finance. Over one in five (22%) admitted they are not fully aware of the options available to them. This may account for SMEs turning to finance which is not best suited to their business, such as overdrafts or credit cards. Indeed, the Barometer found one in seven (14%) SMEs believe the interest rate they have on their current credit is too high.
Stephen Hodges, Chief Executive of Close Brothers Banking Division said: “Making the wrong financing choices can stifle SMEs’ ability to unlock their own potential and create perennial cash flow problems. We work with thousands of SMEs across the UK and know they have very diverse and varied requirements which often aren’t met by more traditional credit and finance options. Not only that, but the landscape is becoming more complex which makes it difficult to navigate for many SMEs. We know, for example, many still rely on overdrafts and credit cards, when flexible options like invoice or asset finance may be more appropriate for their business needs.