Is it difficult to find a loan to help grow your business?

Many businesses find it difficult to secure business loans, but what is the reason for this? Is it down to access or is it down to a fear of funding?

Political instability is affecting every aspect of life in the UK, with the triggering of Brexit and the snap general election causing the public to hesitate about what they want from the government. Businesses are no different, with many claiming it hard to access a loan to grow.

Contrary to opinion pre-referendum, ambition and confidence in the UK has soared, with start-up rates increasing and the UK economy succeeding. Entrepreneurial Brits are not struggling with finding creative business ideas, but they are struggling to decide on where to get a loan or funding.

This surge in starting businesses has seen the growth of alternative financing; crowdfunding and private investment being some of the more popular choices.

Studies show that there are now well over 400,000 businesses moving away from the bank loan to alternative funding options. It isn’t difficult to understand this trend when you consider the success stories of crowdsourcing, with many businesses taking advantage of the breadth of investors available to them.

Research suggests that a third of businesses consider raising funds to grow their business more difficult than it was six months ago and less than a quarter of businesses happy with their current loan provider.

Most businesses want to move quickly to keep up with the demand of their customer, so speed and accessibility are essential to a growing company – something that banks struggle to deal with as they slowly catch up to the rapidly evolving fintech landscape.

Some alternative lenders understand the need for easy use and access to entice businesses to borrow.

RateSetter’s managing director of commercial finance, Paul Marston, says, “We know that the sooner we can put the money into the hands of the business owner, the sooner it can be put to work.

“Lenders need to guide business owners towards the right way to borrow, not just provide a simple yes or no.”

However, the problem might not lie with the amount of businesses looking to find access to finance, but rather a fear of what that investment might bring.

Other research suggests that businesses are reluctant to borrow money from banks or investors because of what it might mean to their independence and direction.

A third ( 27 per cent) of SMEs are holding back the growth of their own business, due to a ‘fear of funding’, by refusing to take external finance, which ever form that might take.

Research from BDRC Continental challenges industry perception that small businesses are not borrowing because of an access issue, but rather because they don’t want to relinquish control.

In fact, according to their research, confidence in securing finance is high; 59 per cent of SMEs were sure they would get the money they needed, if they applied, and 57 per cent felt they had a good understanding of the finance options available to them.

Instead, this bigger issue around the ‘fear of funding’ stems from a belief that external funding results in a loss of independence (47 per cent), that borrowing can cause more worries (44 per cent) and that taking external funding is too risky in the current economic climate (37 per cent).

Ron Robson, CEO of Ultimate Finance, comments, “It’s not good news for the UK economy, if SMEs understand the benefits of borrowing, yet do not seek the funding that could have a positive effect on their operation.

“In many ways it’s not a surprise; years of economic instability which preceded Brexit has led to a general uncertainty on ‘what next’.

“The bigger challenge to tackle is that SMEs have a fear of funding and are not seeking finance when they need it. This is contrary to messages that lenders aren’t lending, which is simply not the case; borrowing figures are down due to demand. This mixed communication is contributing to confusion and takes attention away from educating SMEs about the positive impact borrowing money can have.”

Moral of the story is – finding a loan for your business in this hyper-competitive market is inevitably going to be tricky, but there are plenty of options to choose from and it is a great time right now to find loans and funding.

Robson continues, “There is clear evidence that external funding can have a hugely positive impact on an SME.

“As well as the peace of mind that comes with knowing that the basic bills will be covered, the right funding can be used for positive business investment, for example to upgrade machinery, fulfil a large order or negotiate cash-upfront discounts with suppliers, all of which help to lead to growth.

“The funding sector and the government need to come together to help change the negative perceptions around borrowing.

“Only then can we start to instil a sense of confidence in borrowing in SMEs, and support them to grow.”

Owen Gough

Owen Gough

Owen Gough is a reporter for He has a background in small business marketing strategies and is responsible for writing content on subjects ranging from small business finance to technology...

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