Small UK businesses are diversifying in their choice of finance according to the British Business Bank’s 2018 Small Business Finance Markets report. The findings show signs that small businesses are looking beyond their main bank for finance and turning to alternative sources.
However, an aversion to external finance persists as the report shows over the last ten quarters, only 1.7% of smaller businesses sought new loans, a record low since the SME Finance Monitor began in 2011.
Less than half (43%) were confident they would get a loan if they applied, even though most new loan applications (72%) are approved. Moreover, 70% of SMEs are willing to forgo growth rather than borrow.
Keith Morgan, British Business Bank CEO, said: “A core objective of the British Business Bank is to encourage greater diversity of finance, so we welcome the growth in the uptake of equity finance and other alternatives to traditional lending.
“It can’t be overstated how important it is to build a more complete funding ladder for economically important high-growth businesses no matter where they are located. Scale-ups need more long-term patient capital throughout all stages of their development to be world-beating companies, and we look forward to using our new resources allocated at Autumn Budget to unlock more of this type of capital.”
Entrepreneurial activity in the UK remains strong, with a highest-ever population of 5.7m businesses at the start of 2017 including a record number of new businesses created (c414,000) in the preceding year. While the value of SME asset finance deals (up 12%) and peer-to-peer business lending (up 51%) in 2017 both showed strong growth.
Small Business Minister Andrew Griffiths added: “Small businesses are the backbone of our economy and this Government’s Industrial Strategy is building a Britain in which they can continue to thrive.
“The report from the British Business Bank shows that although challenges remain, more small businesses are accessing finance from a wider range of sources.”