The research revealed significant differences in the how, why, and where SMEs source their external funding and their plans for seeking funding over the next 12 months. 

High street banks remain the most popular source of capital for businesses looking for finance between £10k-£5m (50%) but this shifts significantly for businesses looking to secure larger loans where high street popularity is halved to 28% and falls further to 14% for businesses getting loans of £10-15m.

Direct lenders and private debt funds are the most common source of capital for this quantum at 28%.  

75% of small businesses say they have never applied for external debt funding, compared to 38% of mid-sized businesses. 

Of those companies that have secured finance most recently, most businesses were looking for working capital (42%), followed by asset backed finance (33%) then growth capital (21%).

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When comparing the needs between small and mid-sized businesses, there is a significantly greater take up of growth capital among mid-sized businesses (27% against 13%).

High street banks were the most frequently used source of external debt finance used by 56% of SMEs for their most recent funding followed by alternative lenders (11%), asset-backed lenders (8%) and challenger banks (6%).

Some 60% of small companies used a traditional high street bank compared to 54% of mid-sized businesses.

Ravi Anand, managing director at ThinCats, commented: “Although it’s easy to assume that all SMEs have similar funding needs, this research shows distinct differences between the ‘Ss’, which represent approximately 90% of the UK’s SME universe, and the ‘Ms’, although smaller in number, who account for around 25% of GDP. 

“Mid-sized SMEs are an engine of growth and due to their resilience are more confident about taking on external funding. 

“As a result of mid-sized SMEs’ more complex fundings needs, they are more likely to use an alternative lender and also more likely to use an adviser to help find the best debt solution for their needs.”