Credit Apathy Restricting Potential Growth Opportunities for SMEs

04 Jul 2018

Published in: Black Country Chamber of Commerce News

New research released today (4th July) by the British Chambers of Commerce (BCC) highlights that over half of UK businesses have not attempted to apply for finance during the last 12 months amid limited investment intentions and weakening cashflow.

According to the results of the survey of over 1,100 firms from across the UK, 56% of businesses did not attempt to access finance over the last year, with smaller firms being less likely to apply for funding than larger businesses. For example, almost two-thirds (63%) of small businesses (1-9 employees) did not seek finance, compared to just over a third (39%) of larger firms (50 employees or more).

For those that have applied for funding, there is a clear preference for the conventional sources of finance, such as overdrafts (18%), business loans (16%) and asset finance (9%). Less than 4% sought crowdfunding, peer-to-peer or angel finance.

The results also found that businesses planning on investing over the next year are focusing on incremental investments rather than big expansions. Those planning on investing are primarily looking at putting money into operational initiatives, such as marketing and advertising (49%), staff training (48%), and IT and data security (45%).

Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said: "Accessing finance remains crucial to the lifeblood of a business, yet a decade on from the financial crisis these results suggest that we have moved from a credit crunch to credit apathy where a lack of demand, rather than supply of finance is now the overriding issue. The weak demand for finance revealed in this survey is a key concern because it weighs on investment intentions and means that firms are treading water rather than going for growth, which is undermining the UK's growth prospects.  

"While businesses continue to report a reluctance to borrow in the current economic climate, discouraged demand remains a real phenomenon with businesses reluctant to approach banks to try and get finance because of the assumption that they will either be rejected or that they will have other facilities re-evaluated.

"The government also needs to do more to kick-start business investment. Firms need relief from the heavy burden of upfront costs, which sap funds that could otherwise be spent on big capital expansions. Give companies the financial room to grow and clarity on Brexit and we'd see more long-term investment coming through."

Paul Kalinauckas, Chief Executive at BCRS Business Loans, commented: "Although there has been a boom in the number of Alternative Finance providers, entrepreneurs are spending too much time chasing finance when they need to be concentrating on running their businesses. We need to encourage viable businesses to go for growth with supportive lenders providing the right products and services to meet their needs."

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