Economy

Over one in five SMEs unable to access external finance, research finds

SMEs also speculate that over the next 12 months, nearly two in five (38%) small businesses will see growth in recruitment (19%), new product development (18%), and new market expansion (17%)

New research commissioned by Manx Financial Group has revealed that more than one in five (22%) small and medium sized enterprises (SMEs) that reportedly needed external finance over the last couple of years were unable to access it, while over a quarter (27%) have had to stop or pause an area of their business because of a lack of finance. 

Findings also expressed that the biggest barriers faced by SMEs in sourcing external finance were that it was too expensive (23%), the process took too long (19%), and that there was a lack of flexibility with repayment terms (17%). These businesses also cited other barriers such as the fact that the lender didn’t understand their business (16%) and that they received poor customer care (10%).

In addition, data revealed that SMEs have been forced to pause or stop activities such as expanding into new markets, hiring the right personnel and marketing, due to a lack of financing. It is reported that manufacturing, finance and accounting, as well as retail, IT and telecoms were the sectors that were affected the most because of a lack of external finance. 

SMEs also speculate that over the next 12 months, nearly two in five (38%) small businesses will see growth in recruitment (19%), new product development (18%), and new market expansion (17%). 

However, the research highlighted that a third (34%) of SMEs are concerned that their business will not grow in the next 12 months. If SMEs can leverage appropriate external finances, it is reported that small businesses could grow by 17% on average.

Douglas Grant, CEO of Manx Financial Group, said: “The research sadly reveals what we have been observing for some time: that SMEs continue to struggle with accessing finance and that worryingly, this lack of availability will cost them and the UK economy in terms of growth at a time when it is needed the most.

“A sector-focused, government-backed loan scheme, which brings together both traditional and alternative lenders to guarantee the future of our SMEs in struggling sectors, is critical to ensure that opportunities for their growth are not missed. We very much hope this is something that becomes a reality.” 

He added: “In the meantime, all SMEs would be well-advised to take stock of their current capital structures and, if appropriate, access fixed term, fixed rate loans to prevent additional exposure to an increasingly volatile lending market.”

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