Businesses Owners Still Reliant On Bank Of Mum And Dad As The Real Thing Turns Them Down
Just 25% of micro-businesses have used bank loans to fund growth, with 37% refused finance or credit in their first two years of trading
25% of micro-businesses owners still rely on personal savings, family borrowings and credit card loans, to fund growth – according to a report Close Brothers.
Banking on Growth: Closing the SME funding gap revealed a disparaging gap between the success rates of lager firms and micro-businesses (those with between one and nine employees) seeking finance from traditional lenders.
While 38% of all small businesses have used bank loans to grow, this figure rises to 51% when enterprises with more than 100 workers are considered.
Early-stage businesses and start-ups also struggle to gain the trust of banks in the beginning of their journeys, as 37% admit they’ve been refused credit in their first two years of trading.
It’s suggested a failure for small businesses to secure funds could hamper long term growth and firms are advised to seek alternative forms of finance such as crowdfunding.
Adrian Sainsbury, managing director of Close Brothers Banking Division, said:
“Small businesses have not always found it easy to secure the right funding to sustain or grow their businesses. Given the huge contribution these companies make to the labour market, failure to support their growth is a risk to the UK economy.
“It’s vital that small businesses receive specialised advice and products to suit their circumstances and provide the right platform for growth. One size does not fit all.
“Education is also important. Without the right support, many small businesses are relying on unstable or costly funding to expand. Overdrafts often do not provide enough cash to fund the much needed new vans, computers or machine tools, and at any time the bank can withdraw the facility leaving little or no time to repay the money.”