As a Business Services manager at PKF Francis Clark, I was interested to read of the Federation of Small Businesses (FSB)’s report issue entitled – ‘Going for Growth’
The report has been launched with headline that “Restricted access to alternative finance options among small businesses is restricting UK economic growth” based on findings including:
Only one in seven (13%) small firms are currently applying for external finance, with more than two thirds (68%) being offered lending rates above 4%
- Of those that did apply for finance in Q3 2018, seven in ten (70%) sought a bank loan or overdraft facility. Lack of meaningful competition within the small business banking sector is a chronic issue. The UK’s four largest banks – RBS, Barclays, Lloyds and HSBC – control 80% of the commercial loan market
- Half (49%) of UK small business owners are thought to meet the definition of permanent non-borrower: not currently using external finance, with no plans to do so in future. Almost three quarters (73%) would rather grow more slowly than borrow to expand more quickly. Two thirds (68%) say they have no awareness of equity finance
- Women business owners, those from black and minority ethnic (BAME) backgrounds and those based outside London and the South East find it particularly difficult to secure new funding. More than four in ten (43%) female business owners describe the accessibility of new credit as ‘poor’, noticeably more than their male counterparts (38%)
Going for Growth stresses that Open Banking – which allows business owners to grant third parties real-time access to their banking data – is key to enabling greater access to alternative finance options. FSB is calling on the Government to work in partnership with industry to embark on an Open Banking awareness-raising campaign targeted at small businesses, promoting its potential and allaying security concerns associated with it
- The new report also flags the shortcomings of the Government’s Bank Referral Scheme, which directs small firms that have been denied bank finance to alternative funding matchmakers. Since the launch of the scheme in 2016, only 902 (4.7%) of the 19,000 firms that have been referred through the initiative have gone on to secure new finance
- FSB warns that a chaotic no-deal Brexit would further restrict small business access to finance. Its new report highlights the role played by the European Investment Bank (EIB) in improving small business access to new funding across the UK. The EIB put more than £3 billion behind small business finance markets between 2006 and 2016 and backs the £400 million Northern Powerhouse Investment Fund (NPIF) and £250 million Midlands Engine Investment Fund (MEIF)
A full copy of the report is at Going for Growth.
PKF Francis Clark
I would like to think awareness of the range of finance options potentially available, including equity finance, would be good amongst PKF Francis Clark clients; especially those who read our blog. For a number of years my colleagues have been producing ‘Finance in’ factsheets and hosting the ‘Finance in’ events both of which cover a range of ‘alternative sources of finance’ be they grant, debt or equity.
If you have any queries on alternative finance or in deed bank funding, please do not hesitate to contact your usual PKF Francis Clark contact or if not already a client I would suggest you contact Andrew James (Cornwall and Isles of Scilly); Chris Eddowes or Caroline Butler (Devon and Somerset) or Aaron Lawes (Dorset and Wiltshire).