SMEs unwilling to borrow despite greater access to finance

Oct 11, 2018 Blog  SME funding

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According to the latest BDRC SME Finance Monitor, SMEs in the UK are still not willing to borrow money via external financing, with only 34% choosing this route.  That is despite the fact that the approval rate for funding applications was 85% by the end of August 2018.

“The latest data continues to show a clear trend that demand rather than supply issues are predominately contributing to continued lower levels of lending to SMEs”, said Keith Morgan, chief executive of British Business Bank.  He says that “smaller businesses could benefit from being encouraged and enabled to seek out the finance best suited for their needs”.

According to the report, banks remained the primary source of SME funding, with 67% of loan applications made to the bank.  17% of applications were made to another existing provider, 7% to a new provider and only 4% chose to use an online platform.

Alternative Finance specialists are saying that a reluctance to apply for funding could affect British businesses negative in the long term.  Craig Shah, chief executive of Nucleas Commercial Finance said, “Today’s figures show us that businesses shouldn’t shy away from what external finance could help them to achieve – with only 34% of SMEs using external finance, there are many who are letting opportunities pass their business by”.

The BDRC data showed that SMEs are not put off by the scarcity of financing options, as only 5% indicated that access to finance was a major barrier.  They did however list legislation and red tape, politically uncertainty and the current economic client as major barriers to business growth.

Stephen Pegge, director of commercial finance at trade body UK Finance said, “overall appetite for finance amongst SMEs remains subdued, with many reluctant to borrow amid uncertainty over future trading conditions – this underlines the importance of the government, finance industry and regulators to continuing to work together to address these issues and help SMEs grow and prosper”.

For the full article on Peer2Peer Finance News, click here.

Image: The Bryan Mawr Quill via Flickr (CC 2.0resized)

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