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Most UK Small Businesses Say They’re Unaware of Available Options for Getting Funding

New data shows that by 2024, the majority of small businesses will have made some kind of investment in their company, but only around half of those businesses believe they have a thorough understanding of the many funding alternatives available to them.

The Financial Stability Board (FSB) has released a new report titled “Credit Where Credit's Due,” in which they compile findings that paint a worrying picture regarding the accessibility of finance for UK small businesses and call for action to prevent the crediting mechanism from rusting to a stop, as we saw in the finance environment post-2007’s credit crunch and could happen again if allowed to.

Although the unique conditions of the epidemic led to a rise in the percentage of enterprises taking on debt, many for the first time, the majority of small businesses (3 out of 5) have sought financing in the previous five years. Since January 2020, before the rollout of Covid, small and medium-sized businesses have amassed an additional £36 billion in debt.

In order to compete, small businesses need ready access to capital. Because of the cost of doing business problems, difficulties with supply chains and travel strikes, soaring energy expenses, and the ever-present plague of late payments, small companies must have access to a variety of financing choices to survive.

SMB Opinion Data Reveals Low Awareness

The era of easy online investment money has disappeared, with BTC price predictions not looking promising in the near term in the eyes of many experts. In this environment, the UK’s consumerist cash flow is feeling the constraints of the current recession. 

Less than one-third of business owners think it straightforward to get assistance with credit applications, which is one of the most popular tools SMBs use, and almost a third (29%) believe that unfair conditions and restrictions have been introduced.

Under half of all financing applications were approved in Q3 2022, down significantly from almost two-thirds (64%) prior to the introduction of Covid loans. FSB’s analysis shows that the smaller a company is, the less probable it is that its request for financing would be granted.

Nearly a third of the small businesses that asked for financing in the third quarter of 2022 were offered a rate of 10% or more, and this trend is expected to continue.

FSB National Chair Martin McTague remarked, "Small firms that cannot access credit are small enterprises that are cut off from possibilities to develop and expand." Yes, it really is that easy.

He went on to say that the British nation, cannot afford to repeat the situation that ensued after the credit crunch, when the hopes of scores of entrepreneurs and business owners were dashed by a reduction in their access to credit support, rendering them unable to carry on and further compounding the UK's financial struggles.

McTauge believes that, due to COVID’s deficit, the BoE’s baseline rate increase, and the diminishing and increasing cost of available finance sources, many small enterprises presently are in an extremely perilous situation.

McTague’s research brings together disparate pieces that provide a terrifying picture of possible destruction if the current course of events is allowed to continue.

But he believes the good news is that there is a lot that authorities can do to enhance the finance environment for small companies, therefore facilitating the flow of productive capital into enterprises with substantial expansion potential.

Fixing the unwise call to limit R&D tax support would send a powerful message that the authorities are listening to what SMBs need and are supporting the vast reserves of creativity and passion present among these smaller businesses.

This latest statement on late payments is a positive step, McTague says, but more needs to be done. Specifically, leading auditing groups of big corporations must release data on supply chain payment practices in annual statements. He asks: what is it that is holding the authorities, namely the British government, back from taking action immediately, rather than after months of deliberation?

At the end of the day, small businesses want assurances that they will face no repercussions if they try to grow their operations by investing in new equipment or hiring more workers. The duty rests on the government to put words into action and get key money to the SMBs who will turn these ideas into useful products, new jobs, and infrastructure, offering newfound hopes of resilience amidst the economic woes. McTague ends by saying he has curated a detailed solution that would convert the financing possibilities available to small businesses, replenishing economic momentum and helping business owners.