SMEs Seek Alternative Means of Finance for 2012

Tuesday 10th January 2012

A recent survey has suggested that most UK-based small and medium enterprise owners will be looking somewhere other than banks to sustain their business enterprise this year.

After polling 1,000 SME owners, group buying site Huddlebuy said that a sizeable 65 per cent of them believed that they would have to turn elsewhere for finance in 2012. This was because they either doubted the ability of banks to help them, or thought it unwise to borrow from such financial institutions in the current economic climate.

In spite of a raft of government proposals and initiatives designed to encourage reasonable rate lending to SMEs, the small business owners who were polled still felt that they would require alternative sources of funding this year.

Unfortunately, this worrying trend of disillusionment with the banks’ ability to provide helpful lending was even stronger among younger entrepreneurs. Nearly 75 per cent of 18-34-year-old SME owners surveyed said that alternatives such as peer-to-peer lending services, crowdfunding and other avenues of raising funds would be necessary.

This survey accurately mimics the sentiments of a post from the official ACCA courses (Association of Chartered Certified Accountants) blog in late 2011: “Interestingly, looking at discouraged demand, the levels of SMEs wanting to borrow but not doing so has remained stable. Meanwhile, the share of SMEs that simply don’t think borrowing is a good idea in the current economic climate has rocketed to 74 per cent.”

Joint managing director of Dews Motor Group, Craig Hamer, bemoaned the state of traditional lending avenues for SMEs: "The banks are now the last place many businesses think about for investment and funding...They’re not lending like they used to, and the situation’s only going to get worse in the coming months."

Huddlebuy’s CEO, Saurav Chopra, went further in expressing his lack of faith in UK banks to provide adequate lending for small businesses. However, he expressed hope for SMEs as they have proved their ability to help each other more ably in recent months. He said: "Bank lending for UK small businesses has gone from bad to worse. The coalition government and banks talk a good game but talk is all it is. The reality is that businesses know they can no longer rely on banks. But at least entrepreneurs are fighting back to help fellow businesses find the finance they need."

Indeed, a review of the government’s lending targets of 2011 make for relatively grim reading, as only £56.1 billion of the desired £76 billion was loaned to SMEs last year. Despite the coalition’s hope that SMEs will fuel UK economic recovery, the proposed stimulus in lending still seems to be having difficulty taking root.

Recently, the British Bankers Association suggested that some SME owners who were having difficulty in securing bank loans should consider refining their ability to produce coherent financial accounts and business plans that would be more likely to satisfy hesitant lenders. Invaluable training through CIMA (Chartered Institute of Management Accountants) or AAT courses (Association of Accounting Technicians) is currently available, often via a wide range of business mentoring initiatives.