In recent days, the Federation of Small Businesses (FSB) has voiced concerns that small and medium-sized enterprises (SMEs) are struggling to access alternative finance options – and that this is having a negative impact on economic growth.
In a new report published today, the FSB notes that only one in seven SMEs are currently applying for external finance options – and that Government initiatives to break down the barriers to such options are not working.
The Going for Growth report adds that of those that are applying, more than two thirds are being offered lending rates of four per cent or more.
Interestingly, the report also reveals a rift between the number of male-dominated businesses securing finance and the number of female-led firms gaining access to the funding they need to grow.
For example, in London and South East England alone, almost half (43 per cent) of women-led businesses are struggling to access finance, compared with just 38 per cent of male-led firms.
The report also criticises the Government’s Bank Referral Scheme, which it says is failing to do its job of redirecting SMEs who have been denied bank lending to alternative sources.
According to the FSB’s figures, only 4.7 per cent of the 19,000 SMEs that have so far been referred to the scheme have successfully managed to access the funding they need.
Mike Cherry, National Chairman of the FSB, said: “Despite being a decade on from the crash we still have this dangerous combination of weak appetite for, and low awareness of, alternative finance options, high borrowing costs and inadequate support for small firms that are turned down by banks.
“Too many small business owners approach the big lender they’ve always dealt with as a first port of call when asset, peer-to-peer or equity finance could be a much better match for them.”
He added: “Efforts are being made – not least by the British Business Bank – to address these issues, but there’s still a huge amount of work to do.”