Small firm appetite for finance drops as UK venture funds lag behind US
Responding to the launch of the latest British Business Bank ‘Small Business Finance Markets’ report, which shows appetite for new loans among small firms dropping to its lowest level since 2011, Federation of Small Businesses National Chairman Mike Cherry, said:
“The BBB has done some exceptional work in increasing access to finance across the UK in recent years, particularly in areas outside of London and the South East where investment is harder to secure.
“But the fact that less than 2% of UK small firms sought new loans over the last couple of years is a real concern. We’re lagging behind the US when it comes to venture capital investment in businesses to the tune of millions. That has to change.
“Lots of small firms simply aren’t up to speed on all of their options. Increasing numbers are applying for asset-based loans and exploring the P2P route which is encouraging. When it comes to equity finance, however, lots of small businesses are hesitant about selling a stake in their firm, even though it could be the right move for them. Small firms will often start their finance journey by speaking to the bank they’ve always dealt with, leading them down a more traditional debt route that won’t suit everyone.
“There’s also the issue of low awareness when it comes to government support. More than two thirds of firms aren’t aware of the Enterprise Investment Scheme, for example.
“The £2.5bn handed to the BBB in the Autumn will be vital to helping tackle these issues. With Brexit edging ever closer, we’re set to lose hundreds of millions in small business support from EU funding streams. We need to see further guarantees from the Chancellor that small firms won’t lose out.”