The majority of small and medium-sized enterprises (SMEs) in the UK require funding to overcome cashflow issues and pursue their growth plans, new research from Channel Capital (Channel) has found.
The UK-based, FCA-regulated asset manager commissioned a survey of 506 senior leaders within UK SMEs. It found that 59% of businesses currently need funding to ease day-to-day cashflow issues – that equates to 3.29 million SMEs, while more than two-thirds (68% or 3.80 million) need funding to grow.
There are 5.6 million SMEs in the UK, accounting for 99.9% of the business population as well as three fifths of the employment and around half of turnover in the UK private sector.
Despite the demand for an injection of capital, Channel’s research showed that SMEs are struggling to find suitable lenders. Just 51% said it is ‘easy’ or ‘very easy’ to find an SME loan.
Just over half (54%) of UK SMEs think big banks are too slow in assessing business loan applications, with 47% saying high street banks are reticent to lend to smaller businesses.
Almost two in three (65%) respondents said they are open to using alternate lenders for SME finance options, compared to 31% who said they would only trust a high street bank for a business loan.
Elsewhere, Channel’s study revealed that, of those SMEs which have applied for a business loan in the past, a fifth (20%) thought the process was ‘difficult’ or ‘very difficult’.
Walter Gontarek, CEO of Channel, said, “From Brexit to the pandemic; the cost-of-living crisis to government fiscal U-turns, the past five years have been hugely challenging for SMEs – and financial planning is extremely difficult in the face of so much political and economic uncertainty, as our research has shown.
“Millions of SMEs need funding to soothe cashflow headaches or, crucially, to pursue growth strategies. Yet unfortunately, accessing that finance is notoriously difficult. Our study highlights the poor experience SMEs often have with big banks’ reluctance to lend, not to mention complex and time-consuming application processes with no guarantee of approval.”
Ion Fratiloiu, CCO of Channel, added, “Accounting for three-fifths of employment and half the turnover in the UK private sector, we must better support SMEs with easier access to finance.
“The SME loan market needs to undergo the same level of disruption as consumer loans have, with technology-led and online lenders coming to the fore so borrowers can enjoy the benefits of greater choice, speed, and transparency.
“Positively, our research shows SME leaders are open to working with alternate lenders, including digital lenders, so we’re confident that improving access to finance will open up many new opportunities to these businesses.”