‘Fear of funding’ holding British SMEs back, study finds

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Nearly half of UK SMEs think British businesses are missing out on opportunities due to a reluctance to borrow, according to a new report examining attitudes towards funding.

In a survey by BDRC Continental and Ultimate Finance, 48 per cent of SME owners said they believe firms are losing out on chances because they do not want to borrow money.

45 per cent said that this reluctance to borrow is stifling the economy.

Yet 27 per cent of the respondents said they were holding back on growing their own businesses due to a reluctance to take on external funding.

The report found that 59 per cent of SMEs are sure they would get the money they needed if they applied and 57 per cent say they understand the options available.

But the results uncovered a “fear of funding”, with 47 per cent believing accepting external funding will result in a loss of independence, 44 per cent believing it will cause more worries and 37 per cent believing it is too risky in the current economic climate.

“It’s not good news for the UK economy if SMEs understand the benefits of borrowing, yet do not seek the funding that could have a positive effect on their operation,” said Ron Robson, the CEO of Ultimate Finance. “In many ways it’s not a surprise. Years of economic instability which preceded Brexit have led to a general uncertainty on what next.

“The bigger challenge to tackle is that SMEs have a fear of funding and are not seeking finance when they need it. This is contrary to messages that lenders aren’t lending, which is simply not the case – borrowing figures are down due to demand.

“This mixed communication is contributing to confusion and takes attention away from educating SMEs about the positive impact borrowing money can have.”

Despite the reluctance from some SMEs to accept funding, 27 per cent of those who do borrow cite it as a key driver behind their businesses’ growth.


Photo © William Warby (CC BY 2.0). Cropped.

  • Interesting piece of research. Which echoes what we see going in in the market. Many companies are sacrificing potential growth in favour of a low risk, low growth approach, which is not good for the economy (hence recent figures showing lower growth than predicted). The problem is that the environment does not feel stable enough to take risks, and uncertainties about Brexit continue to cast a shadow – UK businesses need the Brexit arrangements hammered out so that confidence can return. We have a panel of lenders, all with plenty of cash to lend knocking at our door for opportunities, so there is no shortage of liquidity available.