The Forum of Private Business is calling for measures to restore trust in banks and help alternative funding platforms compete in finance markets dominated by mainstream lenders.According to the first quarterly finance monitor report commissioned by the British Bankers’ Association (BBA) a total of 15% of small businesses, or approximately 670,000 firms, needed funding during the past year but did not apply for it.
And almost one in five small businesses believe they will need finance in the next three months but feel they will be unable to apply for it unless economic conditions improve markedly.
“This independent report is helpful in clearing some of the fog of war we have seen in recent years between businesses and banks,” said the Forum’s senior policy adviser, Alex Jackman.
“While we need policies and practical measures to restore trust in the banks we also need to pave the way for innovative, alternative funders to compete in the finance markets they dominate.”
Just 51% of SMEs are presently using external finance – significantly fewer than in 2007 (69%) and 2004 (81%), according to Cambridge University’s Centre for Business Research.
Despite the report finding most lending requests were agreed, figures from market research agency BDRC Continental show that certain types of SMEs are less likely to have been offered what they were seeking.
These included some smaller employers and sole traders, those seeking new rather than renewed funding and firms less than 10 years old, as well as those with a worse than average external risk rating.
According to a recent lending survey by FundingStore.com, an organisation that matches businesses to lenders, 40% of its business has been from start-up companies.
Nick Montague, the company’s founder, says that many of the funding issues at present affect new businesses more than others.
“The main issue in my view is currently with start-ups. They really struggle to find funding, and there are lots of great ideas – and great brains – that are being wasted due to a lack of funding,” he said.
“This is not really the banks’ fault – their products don’t really suit start-ups as there is generally no security provided.”