SMEs fear rejection as just one in five applies for finance

There is a massive divide between companies seeking finance for expansion and those desperately borrowing to survive, according to a new survey.


The report from Albion Ventures surveyed 450 SMEs and discovered that less than one in five (17 per cent) had attempted to raise finance in the last year.


Meanwhile, of those who did apply, 40 per cent of applications were rejected suggesting some companies were just not prepared to tackle the process.


Of those businesses attempting to raise capital during the last 12 months, 28 per cent were seeking it to allow long-term development.


However, 32 per cent needed working finance to keep their company going during difficult economic times.


According to the Growth Report 2013, companies with a larger turnover experienced fewer problems when trying to access finance.


Those in the manufacturing and retail sectors were discovered to be most concerned over the potential impacts that a lack of suitable finance may bring.


Most demand for working finance was shown to come from sole traders, as 62 per cent of funding applications came from these sources.


Patrick Reeve, managing partner at Albion Ventures, said: “Given that SME cash deposits have been net positive throughout the financial crisis and are continuing to grow it is perhaps not surprising that only one in five SMEs have attempted to raise finance in the past year.


“It is commonly perceived that a shortage of finance has become inextricably linked to the fate of smaller businesses, yet the evidence from our report indicates that policymakers should avoid focusing on this issue at the expense of other areas that firms are more concerned about, notably red tape, regulation and a shortage of skilled staff.”


The outlook taken by a company was also measured in the survey and those with a pessimistic outlook took a different approach to raising finance for growth.


Nine in ten pessimists looked to secure finance to pay for day-to-day running costs compared to less than two thirds of optimists, suggesting companies are becoming reliant on this sort of cash injection to survive.


If you firm is struggling to manage its finances, then you may want to consider seeking professional advice on financial restructuring.


If you would like to have a free no obligation chat with one of our advisers please call us on 0207 186 1143.

View all Business Insights