More than one in five (22%) small and medium-sized enterprises (SMEs) that needed external finance and/or capital over the last couple of years were unable to access it. Indeed, over a quarter (27%) have had to stop or pause an area of their business because of a lack of finance. This is according to new research commissioned by Manx Financial Group – a financial services group which includes, amongst other operating subsidiaries, Conister Bank, Conister Finance & Leasing and Blue Star Business Solutions.
The research showed that the biggest barriers faced by SMEs in sourcing external finance/and or capital were that it was too expensive (23%), the process took too long (19%) and there was a lack of flexibility with repayment terms (17%). SMEs also cited other barriers such as the fact that the lender didn’t understand their business (16%) and that they received poor customer care (10%).
The research also revealed that SMEs have been forced to pause or stop activities such as expanding into new markets, hiring the right personnel and marketing, because of a lack of financing. Manufacturing, finance and accounting, retail and it and telecoms were the sectors that were affected the most because of a lack of external finance and/or capital.
Over the next 12 months, nearly two in five (38%) SMEs believe sales will be the biggest area of business that will see growth followed by recruitment (19%), new product development (18%) and new market expansion (17%).
The research also highlighted that a third (34%) of SMEs are concerned that their business will not grow in the next 12 months. However, with appropriate external finance, SMEs on average believe their business could grow by around 17%.
“The research sadly reveals what we have been observing for some time – that SMEs continue to struggle with accessing finance and that worryingly, this lack of availability will cost them and the UK economy in terms of growth at a time when it is needed the most,” said Douglas Grant, CEO of Manx Financial Group PLC. “The amount of growth that is being sacrificed is however significant and will require new solutions which are designed to address this funding gap.”
Some sectors of the economy are recovering more rapidly than others. For those still struggling sectors, they require additional government intervention, but for the remainder, no further government intervention is necessary.
“We were delighted to have been accredited for the RLS last year,” added Grant. “The programme provided the necessary catalyst that many sectors required to thrive. However, this lifeline is now gone and demand for working capital is set to soar to new highs as more businesses desperately require liquidity provisions to counteract record inflation levels, rising interest rates, supply chain issues, increases in wages and additional pandemic-induced headwinds. With the cost of borrowing set to increase, many SMEs are facing their own cost of living crisis.