Why are UK small businesses struggling to access finance?

The majority of the UK’s small businesses seek funding to ensure stability, growth and longevity, yet many are finding it difficult to access what they require.

Research from CYBG earlier this year revealed that more than a third of SMEs find accessing finance a challenge, while nearly one in ten suggested it was nearly impossible.

As a result, 60% of SMEs have listed concerns over their abilities to grow in the long-term, as they worry finance will not be available to drive desired changes.

The British Business Bank meanwhile suggests that an estimated 100,000 SME loan applications are rejected annually – creating a funding shortfall of around £4 billion.

Add in Bank of England statistics that show that lending to the private sector by the largest banks dropped by £536 million between December and January, and SMEs have a financing hurdle to overcome.

SMEs can seek refinancing for a number of reasons, from hiring new staff and investing in infrastructure to overcoming cash flow difficulties and boosting working capital.

With a range of refinancing options available, it’s important that businesses make the right strategic decisions, especially if debts need to be managed or overcome.

Those facing difficulties should seek advice on the best approaches to take, as no two businesses or situations will ever be alike.

Similarly, if businesses are planning to expand, a pre-lending review can highlight potential pitfalls and showcase why a company is suitable for financing.

Firms with poor credit can often be refused finance, as it can be a sign that a business takes too many risks or does not take its obligations seriously enough.

Documentation is also key, as lenders will want to see evidence of a healthy cash flow and a clearly defined business plan – the latter can be a particular issue for start-ups who lack a long or detailed financial history.

Outstanding debts can also cause issues when trying to access finance as it can suggest a poor level of financial management or cash flow difficulties.

Alterative finance options do exist for firms in these situations, which is why it is important for a business to assess their situation and to seek advice where necessary.

By Phil Smith


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