Start-up business owners are more likely to trust traditional lenders than those of more established companies, new research reveals.
The study, from Hitachi Capital Invoice Finance, shows how 28 per cent of businesses established for 12 months or less completely trust such lenders, for example banks, and 37 per cent somewhat trust them, in comparison to just 14 per cent of longer established businesses that completely trust them.
Of the 502 business owners surveyed, 90 per cent of those from new start-ups have invested their own money into the business, with 72 per cent using personal savings. More start-ups than established companies used a personal credit card to access funds for the business (33 per cent compared to 25 per cent respectively) and re-mortgaged their home (37 per cent compared to 17 per cent respectively).
Owners of newer businesses are also most likely to explore alternative funding methods for the business, and are willing to access any kind of finance for their business whenever they can (34 per cent), compared to more established businesses (16 per cent.) The same can be said of those companies who do not feel they have sound knowledge of the different borrowing options available to them (30 per cent for start-up companies compared to ten per cent of more established.)
When asked for their main reason of not trusting traditional lenders, newly started businesses and more established businesses had similar reasons. – The main reason being because of the bank’s reputation (39 per cent VS 37 per cent).
Andy Dodd, managing director at Hitachi Capital Invoice Finance comments, ‘It’s interesting to see business owners remaining cautious with regards to business funding, potentially restricting their ability to grow. There appears to be an ongoing negative perception of more common lenders, despite them using this option to keep their businesses funded. This shows a clear discrepancy between SME’s wanting to borrow from these types of lenders and them needing to.
‘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.’
When it comes to location, business owners based in London are the most trusting (65 per cent do trust them) and those in Northern Ireland, the least (53 per cent say they do not trust them.)
Companies in the business service sector are least likely to want/need finance than the recruitment sector. For example, when asked if they had sought any external finance in the past 12 months, only 51 per cent of business services had, in comparison to 90 per cent of recruitment agencies.
Top five SME business concerns for 2018
Turnover (38 per cent)
Brexit (28 per cent)
Bringing in new customers (27 per cent)
Market competition (24 per cent)
Cashflow preservation (21 per cent)