The Business Terms Entrepreneurs Don’t Understand
79% of business owners aged over 55 have not been put off from applying for finance because of they were unsure of the terminology
UK small enterprise owners are refusing to apply for business loans, because they’re too intimidated by financial jargon.
A report by LDF has revealed that 48% of business owners opted against asking their bank for financial assistance, because they wouldn’t have understood certain terminology.
Just 15% believe they’re familiar enough with banking terms to feel confident in negotiations, with this language barrier touted as a reason why there is a late payment epidemic worth £26bn among British businesses.
Interestingly, older entrepreneurs seem more bullish than their younger counterparts – with 79% of over 55 year olds refusing to hold back on applying for loans due to this problem.
The most misunderstood terms are:
1. CAPEX (33%)
2. ROCE (31.4%)
3. Ebitda (30.4%)
4. COGS (30%)
5. Arbitrage (28.50%)
6. Balloon payment (27.5%)
7. Opex (25.3%)
8. Ebit (24.5%)
9. CCC (24.3%)
10. IFF (24.1%)
11. Advance corporation tax (21.1%)
12. COS 20.8%
13. AER 20%
14. P&L (17.4%)
15. APR (17%)
Peter Alderson, managing director of LDF, said:
“It’s disappointing, but perhaps not surprising, that nearly half of UK small businesses are put off applying for finance by the terminology used. For many, running a small business is a challenging, all consuming activity, so complicated financial jargon and acronyms are just extra barriers in the way of their success.
“The point at which a larger number of business owners are suddenly put off by business and finance technology is an interesting one. There seems to be a tipping point, at which the companies really start to grow, and there is often a need for additional finance, but the language used doesn’t encourage people to apply, potentially hindering their expansion.”