The majority of SMEs do not trust traditional lenders to support their businesses according to two disparate reports.
Last week, BDRC issued its latest SME finance monitor, which showed that 8 out of 10 SMEs are refusing to apply for new finance as a result of Brexit uncertainty.
Despite ongoing uncertainty, the report clearly shows SME appetite for growth remains strong, with 45 per cent of small businesses stating they have plans to expand in the coming year, says Mark Sismey-Durrant, Hampshire Trust Bank’s CEO.
“For many, an external source of finance will be needed to achieve these goals but with almost half of SMEs that are open to seeking external finance saying they have been discouraged from applying it is clear that more must be done to support these ambitions.”
Ambitious businesses should be looking at all their finance options to ensure they are getting the most from their bank – both in terms of the right types of finance but also finding financial partners whose experience adds real value over the long term, he adds.
Today, similar research from Hitachi Capital Invoice Finance shows that more than a third of businesses try to avoid borrowing money at all costs and would rather invest from their personal savings than borrow from another source.
The main reason for not wanting to borrow money, is that companies want to owe as little as possible (53 per cent), with a further one in ten admitting that borrowing money has led the business into further debt in the past.
Of 502 business owners surveyed, just 15 per cent say they completely trust traditional lenders, and the main reasons for not trusting them is because of a bank’s reputation, followed by previous and personal experiences and for security reasons.
“It’s interesting to see business owners remaining cautious with regards to business funding, potentially restricting their ability to grow,” says Andy Dodd, managing director at Hitachi Capital Invoice Finance.
“More than twenty percent also noted that maintaining their cashflow is a top concern for them for the year ahead, and indicates this is something they are currently struggling to manage. It is important for business owners of any kind to be aware of the funding options available to them and what they are eligible for, as there are a number of options available to help prioritise overdue payments and maintain financial resource, particularly outside traditional lenders.”