A lack of alternative funding options is hindering progress amongst Britain’s small businesses, new research has found.
Identifying the priorities of UK small and micro business owners, the latest Business Barometer from banking group Close Brothers has shown that nearly seven-in-ten smaller businesses would benefit from greater choice when it comes to accessing finance.
More than one fifth remain in the dark about the range of funding options available to them, whilst 19 per cent of owners claim there is too much bureaucracy involved with raising finance.
Obtaining a loan continues to be a struggle for many small business leaders, with 14 per cent revealing that a lack of capital results in failed loan applications.
the funding landscape is becoming more complex which makes it difficult to navigate for many SMEs, explained chief executive of Close Brothers? banking division, Stephen Hodges.
Small business owners are increasingly forced to turn to financing options that arent best suited to them. Indeed, the research showed that a further 14 per cent of owners believe that the interest rate in place on their current credit is too high.
Hodges went on to say: Making the wrong financing choices can stifle a small business’s ability to unlock potential and creates perennial cash flow problems. There are thousands of small businesses across the UK with very diverse and varied requirements which often arent met by more traditional credit and finance options.
we know, for example, that many still rely on overdrafts and credit cards, when flexible options like invoice or asset finance may be more appropriate for their business needs.
Crowdfunding continues to be a source of financing the country’s smaller business owners are turning to for support. In April, Business Advice discovered that as many as 40 per cent of the investment opportunities available on platforms like Crowdcube channel much-needed capital to micro firms and startups.
Small business owners have welcomed recent moves by the Competition and Markets Authority (CMA) to make the retail banking sector more transparent.
On 17 May, the CMA published a list of proposals that would make it easier for businesses to compare options and switch between lenders to get a better financing deal.
Commenting on the CMA’s recommendations, national chairman of the Federation of Small Businesses (FSB), Mike Cherry, said: Today’s banking market doesnt work well for small businesses. Levels of switching between current accounts amongst small firms are far too low, with only four per cent of FSB members switching in the last year.
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