SMEs Increasingly Spurning Traditional Sources of Finance, Claims New BDRC Survey.

Has your small business struggled to raise finance to fund expansion over the last couple of years?

Have you tried to secure funds but been rejected by the banks, or have you decided against approaching your local bank manager because of the time-intensive application process or for fear of rejection? Well, if you answered affirmatively to either of those questions, then you have our sympathy. Our accountants know only too well that the last few years have been difficult for all small businesses, particularly those with ambition and drive who were looking to grow. The banks have been unwilling to lend, so access to funding has been severely restricted.

It’s probably scant comfort to learn that you are certainly not alone.

Your experiences have been repeated up and down the country. According to research conducted with over 65,000 small UK firms by market research company, BDRC Continental, fewer SMEs are now using traditional forms of finance like overdrafts, loans and credit cards to fund expansion, and are turning instead to alternative forms of financing like leasing and peer-to-peer lending .

So what did BDRC’s research discover? The survey of SME financing in Q2 2014 found that 30% of small firms were still using traditional financing methods, but that figure is down from 36 per cent two years ago. In terms of alternative funding, 18% of the SMEs surveyed claimed to have sourced expansion funding through leasing and invoice finance. Perhaps the most surprising statistic of all is that over 805 of the SMEs surveyed had not applied for any sort of finance at all over the course of the last 12 months. Only 17% of SMEs had borrowed during the preceding 12 months, whilst 5% had tried to borrow but were turned down.

Such findings inevitably raise questions over the role banks are currently playing in financing ambitious start-ups and growing small businesses. The government has long maintained that the banks are hampering the economic recovery by their unwillingness to lend to SMEs. That’s why it has been keen to promote alternative forms of business funding like peer-to-peer lending. But are things really as bad as the BDRC survey suggests? Are businesses in general really getting a raw deal from the High Street banks, or is it just a problem faced by SMEs?

Well, new research from the ICAEW wouldn’t necessarily see things in the same way as BDRC Continental.

Its research, in fact, suggests that the majority of businesses are confident in their relationship with High Street banks, and that most are happy with the levels of service they are receiving. What’s more, it also found that 74% of leading businesses found no difficulty renewing their overdraft or loan facilities. However, in fairness the ICAEW research did find that the picture varied when it came to small and micro businesses. The ICAEW found that 40% of the SMEs surveyed would like to have a stronger relationship with their banks, but struggled to make this happen. So there are obviously still problems that need to be addressed.

Is your SME having difficulty raising finance, or struggling to find credit to fund expansion? Would like some expert help and advice? Then why not speak to Steven Glicher’s accountants? Our accountants can help your business raise finance and can give you expert advice on identifying the type of funding you need, finding the most suitable sources of finance, and calculating the cash-flow projections, budgets, and trading forecasts.

For further information give us a call on 0161 485 8007, or email

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