Three in five London SMEs have been turned down for business finance

Why it’s tough to scale businesses

A lack of understanding around business and finance terminology, coupled with a higher likelihood than other SMEs across the country to be turned down for finance, could be hampering the growth of London small businesses.

The latest survey by LDF, the largest independent provider of finance to small businesses, highlights that not only do over half (52.1 per cent) of the capital’s SME decision makers say that business terminology has put them off applying for finance, but that 57.6 per cent have been actually turned down for loans. Terms such as CAPEX (26 per cent), COGS (24.7 per cent) and ROCE (20.5 per cent) are the ones that are most likely not to be understood by London’s SME decision makers.

The statistic of almost three in five London SME decision makers having been turned down for finance is in sharp contrast to those in Wales, where only one in three (30.4 per cent) has the same complaint. Elsewhere, SMEs in the South West and Yorkshire are close behind Wales in the acceptance league for loans. After London, it is the SMEs in the East of England (57.1 per cent) who struggle most to obtain finance.

“It’s disturbing that almost three in five (57.6 per cent) SME decision makers in London have been turned down for finance.  At LDF, we are committed to making access to finance, as easy, quick and trouble-free as possible,” says Peter Alderson, managing director of LDF.

“Also disappointing, but perhaps not surprising, is that over half of London’s SMEs are put off applying for finance by the terminology used. For many, running a small business is a challenging, all consuming activity, so complicated financial jargon and acronyms are just extra barriers in the way of their success.

The survey also highlights that more of the capital’s SME owners (83.6 per cent) feel that the approval of, or time taken to receive money or both, has had a negative impact on their business. For 21.3 per cent of them it meant making some staff redundant, while 18 per cent had to remortgage their house or flat and 14.8 per cent had to move. Elsewhere over one in seven split up with, or divorced, their partner.

From an emotional perspective the negative impact around approval of or the time taken to access finance can be seen on the SME decision makers in London with over half (54.1 per cent) saying it made them stressed and 45.9 per cent reporting they felt depressed.

Over two in five (43.8 per cent) London SMEs see business finance as a necessary part of business growth,  however, 38.4%  feel that taking out business finance has a negative stigma attached to it.