Over half of UK start-ups rejected for a bank loan

59% of start-ups have been rejected for a bank loan to start their business, according to a new study conducted by UK business angel network Angels Den.

Surveying 821 entrepreneurs behind start-ups launched in the last two years, the study found that only 19% of business owners had successfully secured traditional financial investment from the banks, with 58% instead using a combination of savings and money from family and friends to get their business off the ground.

Of those turned down from traditional funding, the start-ups most frequently rejected for bank loans were primarily those in technology with 14% of tech businesses rejected, alongside food and drink (8%), and health and fitness (7%).

32% of businesses that had been unsuccessful in securing a bank loan felt it was due to having unrealistic financial predictions, whilst 28% said it was down to a lack of business experience, as well as existing personal debt (21%).

Other reasons argued as to why start-ups had been turned down included age (16%) and poor credit rating (9%).

Angels Den co-founder and director, Bill Morrow, said of the findings:

“Unfortunately, it is all too often the case these days that promising start-ups with an excellent service or product to promote fall at the last hurdle, whilst trying to secure traditional investment.

“We’re witnessing a number of start-up businesses turning to angel investors and online crowdfunding in order to secure investment. Not only is it a fantastic way of raising investment, it also gives you the chance to get some experienced and well connected business people on board.”