SMEs are struggling with a funding gap of £4.3 billion, according to new research commissioned and published by crowd funding business Money&Co.
This study involved senior management at 301 small and medium firms across the UK being questioned about their most recent loan applications. The figures collected revealed an average funding shortfall per business of £11,752 for companies with 10-49 employees and £69,961 for those with 50 to 249 employees.
Money&Co CEO, Nicola Horlick, thinks this research highlights how, despite increasing pressure coming from the Government and other sources, banks are failing to provide UK SMEs with the necessary finances to help stimulate growth.
She said: “Although recent figures indicate that the UK economy is recovering, we cannot ignore a funding gap of such magnitude.
“The £4.3 billion funding gap isn’t just acting as a barrier to UK SME growth. It could potentially stifle the recovery.”
Is the banking system broken?
Out of the firms interviewed, 64% agreed that the traditional banking system is broken and 51% believed bank bureaucracy deters businesses when applying for a loan.
While SMEs clearly have a lack of confidence in the current banking system and are evidently not receiving the necessary credit to expand and in turn boost the economy, these statistics showed that 72% would still approach a bank as the first port of call when looking to apply for a loan.
It would seem that alternative methods of funding to banks such as crowd funding are still not being considered as an initial plan. But if banks continue failing to meet the credit needs of small businesses, it will be interesting to see if SMEs’ approach to financing their companies changes over time.
Do you prefer approaching banks for loans in the first instance or have you looked into alternative financing instead? Tweet us @theinsuranceoct.