A new survey conducted by merchant banking group Close Brothers found that many SMEs still face barriers to accessing finance and financial advice. It's feared this funding gap could limit the growth and success of the UK's small businesses, so what needs to be done to address this situation?
High street lenders still key funding source
The Close Brothers’ report highlighted that while high street banks remain the main source of finance for a significant portion of SMEs (38%), many don’t feel they’re getting the advice they need from these lenders. What’s more, 46% of the businesses surveyed said they’ve faced difficulties when trying to access funding.
Weak cash flow was revealed to be the top reason banks turn down small firms, followed by lack of capital and inadequate business plans. Although the largest number of companies were refused a loan within the first two years of operation (37%), the problem isn't only effecting start-ups. 25% of respondents said they were denied funding when they were trying to grow, and 11% during the normal course of business.
Understanding SMEs’ needs
One of the main barriers cited by SMEs to accessing finance was that lenders don't understand their sector or business needs. As Adrian Sainsbury CEO of the Commercial Division at Close Brothers explained, "Many [smaller businesses] do not feel their banks are taking into account their sector and specific circumstances, meaning they are not receiving the level of support they need to secure the right products and funding for the future."
Rob Straathof CEO of loan provider Liberis agreed with these comments: “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.”Mr Sainsbury believes these issues need to be addressed by mainstream funders to help maintain the key role SMEs have in the UK's economy.
It's hoped the government's new Banking Referral Scheme – which helps firms access alternative finance after they've been refused by major lenders – will go some way to close up the funding gap. Business owners can also improve their chances of securing funding by strengthening their cash flow – and collecting late payments is an effective way to do this. Contact Dukes Bailiffs to find out how our ethical enforcement services can help.