Start-up survival hinges on access to finance, survey suggests

New businesses are most likely to fail due to a lack of start-up finance, a new study shows.

Despite government efforts to increase lending and investment for small businesses, start-up finance is proving the biggest problem when it comes to business survival.

In a survey conducted by tax and accounting information business Bloomsbury Professional, 71 per cent of accountants questioned say that insufficient finances to fund start-up costs was one of the key reasons for new business failure.

In recent years the government has implemented lending and investment schemes such as the Enterprise Finance Guarantee Scheme and StartUp Loans as well as initiatives such as Project Merlin.

Martin Casimir, managing director at Bloomsbury Professional, comments, ‘Financing has always been a huge barrier for start-ups, but since the financial crisis, has become almost impossible to find.

‘The continued difficulty in obtaining new business bank lending is holding new businesses and the UK economy back. The small businesses that could drive the UK out of recession can’t even get out of the blocks.’

Bloomsbury says that the bank lending issue is magnified by a lack of ‘thorough planning’ by new businesses.

Further findings from the study reveal that 60 per cent of accountants picked poor market research by start-ups as another key reason for failure. Following on from inadequate research, costly overheads is identified by 57 per cent as a key issue.

Casimir continues, ‘Start-ups need to do their research. They need to have a clear idea of how they will fund themselves, how they will manage their costs, and the layout of the market in which they’re about to compete.’

‘Banks are reluctant to lend, but they will be even more reluctant to lend to just an idea. Start-ups need to give banks plenty of information about their business when applying for finance, but many just aren’t ready to provide the kind of information that banks need.’

Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

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