40% of SMEs fail to secure funding

14 November 2013

A leading lender has revealed that 40 per cent of SMEs remain locked in a capital battle, which has resulted in lost opportunities to grow their businesses

A leading lender has revealed that 40 per cent of SMEs remain locked in a capital battle, which has resulted in lost opportunities to grow their businesses.

Personal asset lender borro, which has lent £29 million to SMEs, stated that almost a quarter of SME owners (21 per cent) say they have missed out on a growth opportunity due to a lack of accessible finance. Two in five SMEs (40 per cent) have been unsuccessful in securing funding from the bank with a third (33 per cent) saying they wouldn’t even bother with the bank in the first place. With bank confidence still at an all-time low and over 60 per cent of borro’s customers being small business owners, it is not surprising that some SME owners have not even attempted to approach the banks for a loan.

borro’s research has shown that two thirds (63 per cent) of small and medium sized business owners lack confidence in their bank, and are unsure of whether their bank will lend to them. Over two thirds (67 per cent) of small to medium sized business owners believe that banks should relax their lending criteria as those seeking finance are denied due to credit checks and not fitting the lenders profile.

Paul Aitken, CEO of borro, said: “A dramatic shift is needed for smaller business owners to feel they can gain access to much needed finance. With the initiatives introduced by the Government still not easing the capital battle; there is still a demand for small business owners to access finance quickly. This may be to ensure the business is able to take advantage of growth opportunities or address cash flow problems before they escalate. Our research demonstrates that this demand is not being met by banks and other traditional lenders.”

Challenges facing SMEs

The last 12 months have remained challenging for smaller businesses with a third (32 per cent) experiencing a decline in revenue and 35 per cent seeing clients reducing their budgets. The need to access finance has never been greater for SMEs as increasing supplier costs and issues with customers paying late also top the list of issues affecting SMEs:

Main challenges SMEs have faced over the past year	%
Clients reducing budgets/ reduced demand from customers	35%
Decline in revenue	32%
Decline in profits	29%
Increasing supplier costs	29%
Customers paying later than in the past	28%
Difficulties with paying tax	8%

borro has seen a huge increase in the number of small business owners taking a loan against their personal assets. Over the last 12 months, the average loan amount for SME owners is £24,000, borrowing over an average loan period of 6 months. The types of assets typically used by this customer base range from prestige cars and fine art to antiques.

Paul Aitken continued: ‘We are able to provide risk free finance against personal assets within 24 hours. Over 60 per cent of our customers are small business owners looking for quick access to finance. Many need to seize an opportunity or facilitate a transaction which will help them grow their business and ultimately boost the economy. Since launch in 2008 we have loaned £29 million to business owners, £12 million of which has come to us over the past year. We expect this trend to continue in 2014’’.

borro offers small business owners, entrepreneurs and all other customers short-term loans of up to £1,000,000. Loans are secured against assets including fine art, antiques, prestige cars, luxury watches, diamond jewellery, gold, yachts, fine wine and other high value assets. A transaction with borro is transparent, with all rates and processes made clear from the outset. There are no credit checks and loans can be redeemed at any time without penalty.

Source: Bridging & Commercial — https://bridgingandcommercial.co.uk/40-of-smes-fail-to-secure-funding