Why small businesses need faster finance

Everline and ezbob COO Russell Gould shares his thoughts on bank lending, friends and family funds, and how the face of finance is changing

A small injection of cash can help a small business to develop its infrastructure, build a brand and recruit the right people.

However, it’s clear that small businesses are reliant on their own personal savings and those of friends and family to fill a gap or take advantage of an opportunity.

Many people don’t even realise that there are alternative funding options to the banks, which is why they end up turning to their family. The risk is that borrowing from friends and family can so often put relationships under strain.

As managing cashflow and access to working capital are such important issues, we commissioned Opinium Research to independently survey over 1,000 small business decision makers about their working capital needs recently. We were keen, as a digital lender to small businesses, to highlight some common trends.

The survey found that close to a third (30%) of finance borrowed by small business decision makers comes from friends and family. Of those surveyed, only 53% received their finance from banks.

Changing face of finance

The findings on how small businesses use of bank finance and how they feel the banks serve their needs were particularly interesting. More than two-thirds of small business managers feel banks don’t understand the changing challenges that small businesses face.

It would be reasonable to surmise that this partly explains the borrowing from friends and family. In addition, 67% feel that banks’ services, products and/or behaviours have not evolved to support small and medium sized businesses in the last three years.

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Despite the accelerating speed of business driven by the web, businesses, on average, expect securing a business loan to take seven days.

The study also found that half (49%) of respondents experience cashflow problems each year and a further 27% experience them at least once a quarter which highlights the need to further financially support small businesses.

More than half (55%) believe having fast and convenient access to cash is becoming more important to small businesses – only 2% believe that it is becoming less important.

Access to working capital

In addition, 68% of small business decision makers believe that lack of working capital is having a detrimental effect on their business growth and 40% believe slow decisions are negatively impacting their growth.

If given an extra £50,000, the majority (57%) would use it to grow and develop their business by upgrading tools and equipment, employing more staff and investing in marketing, for example.

From our point of view we have sought to provide a service that enables companies to secure small business loans without having to wait a week. As the survey suggests, getting a small cash injection in just a few hours can often make a big difference.

Small businesses funding needs to be fast and flexible, without endless paperwork and meetings – why shouldn’t business owners be able to complete an application in 10 minutes and have money in their account half an hour later?

Whether it’s for limited companies, limited liability partnerships or sole traders looking to access sums of up to £120,000 over a period of one to 15 months we’re looking to make the process easier and don’t charge fees for repaying early.

Russell Gould is the COO of the digital lenders to small businesses Everline and ezbob. 

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