Banking advice gap hits small business funding
46% of small businesses have struggled with barriers when trying to secure finance, with 24% turned down for finance completely
Just 19% of the UK’s small businesses have said their bank’s advice always meets their needs, according to research from Close Brothers Group.
The study of 1,000 small business owners found that 46% have come up against barriers when trying to access finance, with another 24% turned down for growth funding completely.
Of those who did experience barriers, 22% claimed that the lender didn’t understand their specific needs, while another 25% said the lender did not understand their sector at all.
The report found that ‘generalist lenders’, who account for 90% of all lenders, were unable to meet the requirements of businesses at different stages of growth.
With 38% of small businesses using high street banks as their only source of funding advice, this poses a major challenge to those looking to secure investment.
Just 28% of those surveyed were found to have planned their needs for finance more than a year in advance, while 64% had only planned up to a year in advance and 8% did not plan at all.
Last week saw the launch of a new government scheme requiring banks to refer small businesses towards alternative sources of finance if they have been rejected for a loan. It’s hoped the referral scheme will plug the estimated £4bn funding gap and break the monopoly held by the Big Four banks.
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Adrian Sainsbury, CEO of Close Brothers commercial division, commented:
“Given the importance of small businesses to the economy, it is vital that these companies are properly understood by the mainstream funders they turn to for guidance, whether knowing the specific financial needs of that business in a particular sector, or identifying the type of lending that will best suit their business at any given time. A specialist, rather than a generalist, approach is clearly beneficial.”