A fifth of SMEs unable to expand their business due to finance rejection
As rampant inflation finally eases, the UK could be on the brink of a potential SME boom with business owners and leaders ready to invest an estimated total of £2.4tn over the next two years, if they can overcome the funding challenges that are currently holding them back.
Research from the UK’s largest specialist lender, Together, finds that 12% of SMEs have in fact been denied or rejected for an approved loan from a mainstream lender in the last 12 months – significantly dampening investment ambitions resulting in 21% of business leaders and future entrepreneurs delaying innovation projects and new product launches, as well as 20% refraining from being expanding their workforce.
Together’s research also finds further barriers to lending with 17% of SMEs have also been denied or rejected business or personal credit cards, loans from family and friends (12%) or been unable to remortgage a business or property (10%) – in the last 12 months .
Impact from SMEs being denied or rejected finance in last 12 months includes
| Have put off moving premises
| 29% |
| Have put plans on hold to expand our property portfolio
| 27% |
| Have missed out on potentially lucrative property deals
| 25% |
| Have delayed refurbing premises
| 22% |
| Delayed product launch
| 21% |
| Delayed expanding workforce
| 20% |
| Not invested in machinery, vehicles or technology | 11% |
The barriers found in access to investment funds come, as despite the appetite for support, tougher lending criteria has been imposed by most mainstream and high street banks. Creating a funding void for well over half of SME loan applicants, a further 55% state that they have no choice but to identify alternative finance sources or providers to fulfil their business objectives.
An increasingly popular way for companies to provide a cash injection is bridging finance – a product specifically designed to help SMEs – and typically provided by specialist lenders. 14% of UK SMEs have used a bridging or short-term loan to support growth in the past and Together has provided £100m of bridging finance each month to support businesses this year.
Ryan Etchells, chief commercial officer at Together commented: “The UK’s 5.5 million small and mid-sized business owners are champing at the bit to realise their investment and growth plans over the next two years.
At Together, we will continue supporting SMEs across the UK, providing the investment they need to meet their ambitions. It will be interesting to see whether thegovernment, whichever it may be, will be able to deliver on the support the sector has to have to make these ambitions a reality. Further stabilising the dire impact of energy, labour and running costs is a must, as well as ensuring that the new party in power understands the financial support that these businesses need.”
