Finance · 30 August 2017

Small business owners lose trust in lenders as bank borrowing slows

Minature houses resting on pound coin stacks concept for property ladder,  mortgage and real estate investment
Younger entrepreneurs were most likely to trust bank lenders
Just 15 per cent of small UK business owners fully trust traditional bank lenders, according to new findings, as fresh Bank of England figures show bank borrowing at its slowest for two years.

As part of anationwide study of over 500 small business owners, by HitachI Capital Invoice Finance (HCIF), over two-thirds said they sought out external finance in the last year, despite the trust deficit.

The biggest factor causing distrust among founders was the reputation of the bank, cited by over a third of respondents. Meanwhile, over a quarter said past personal experiences were the reason, while a quarter were deterred from accessing bank finance for security worries.

A closer look at the findings revealed some curious demographic differences in the perceptions of traditional lenders.

In Northern Ireland and the North East of England, not a single respondent said they fully trusted high street banks, while 28.46 per cent that did in London far exceeded the 15.54 per cent UK average.

The age of the company was also a factor. Some 28.3 per cent of new startup founders said the completely trusted traditional lenders to have their best interests at heart.

Commenting on the findings, Andy Dodd, HCIF managing director, said the cautious borrowing outlook would eventually restrict growth for founders.

“There appears to be an ongoing negative perception of more common lenders, despite them using this option to keep their businesses funded. This shows a clear discrepancy between [small business owners] wanting to borrow from these types of lenders and them needing to.”

The research also collected the biggest business concerns for the year ahead.

  1. Turnover (38 per cent)
  2. Brexit (28 per cent)
  3. Securingnew customers (27 per cent)
  4. Market competition (24 per cent)
  5. Cash flow (21 per cent)
“More than twenty percent also noted that maintaining their cash flow is a top concern for them for the year ahead, and indicates this is something they are currently struggling to manage, ” Dodd added.

“It is important for business owners of any kind to be aware of the funding options available to them and what they are eligible for, as there are a number of options available to help prioritise overdue payments and maintain financial resource, particularly outside traditional lenders.”


 
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ABOUT THE EXPERT

Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.

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