Finance · 20 October 2017

Half of the UK’s fastest growing small firms are held back due to lack of finance

Lack of finance is preventing owners from making vital investments
Lack of finance is preventing owners from making vital investments

Around half of “high-growth” small businesses – those that have seen annual revenues grow by more than 20 per cent over the last three years –have been hindered from growing further due to lack of finance, research has shown.

Overall, roughly a third (36 per cent) of UK businesses have had growth plans put on hold because they’ve been turned down for funding, according to a study published by Santander.

The study found that, of the UK businesses that’ve been turned down for funding over the past three years, 38 per cent said the rejection had resulted in an inability to invest in a “significant growth opportunity” like expanding overseas, moving to new premises or acquiring a rival firm.

Roughly a third of small company owners said they’d been turned down for a business loan by their bank in the past three years, whereas 12 per cent said they’d been rejected three times of more by banks.

Some 14 per cent of small business owners said they’d most likely look to use personal debit or credit cards to secure future growth opportunities for their business, in the face of a lack of finance.

The need for greater and more effective funding options for Britain’s fastest growing small businesses is more pressing than ever.

Santander’s study of over 1,000 UK companies revealed that the top three priorities for business leaders over the next 12 months are to grow marketing initiatives (49 per cent), invest in research and development (32 per cent) and hire new staff (35 per cent).

Some 34 per cent of high-growth firms would like to launch new products in the year ahead, and 12 per cent said they’d like to begin an exporting operation.

In terms of their long-term growth ambitions, 31 per cent of high-growth small business owners said their man aim was regional growth, with 30 per cent wanting to build a national franchise. A slightly fewer number – 23 per cent – claimed the aim was to grow their business internationally.

Commenting on Santander’s research, the head of growth capital in the lender’s Corporate and Commercial division, Darren Hart, said: “Large numbers of UK businesses are looking to invest for growth, but are unable to access the right type of funding.

“It’s not just high-growth firms. A third of firms with annual revenues of more than £20m said their growth business aspirations had been hindered by a lack of finance.”

Read more: The dos and don’ts of alternative finance – From cash flow pick-me-ups to large scale projects

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ABOUT THE EXPERT

Fred Heritage is deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London. He previously worked as a reporter at Global Trade Review magazine.

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