Having access to adequate lending is essential for small businesses looking to grow. This has long been true, but now, when access to funding is becoming more difficult, many more SMEs are finding themselves unable to grow and expand due to inadequate financing. A new survey by the Federation of Small Businesses (FSB) has turned up further data that many small firms are unable to get access to the funds they need to continue to grow.
The FSB has shown that 42% of those businesses who have applied for a loan have said they were turned down. This means that nearly half of all small businesses seeking bank finance have not been able to secure it, meaning they are unable to invest back into their companies and achieve growth. While many of these businesses are managing to weather the recession, business confidence is declining. This of course has big impacts for business growth, as if businesses are not confident in their ability to secure funding then they won’t be planning for growth.
However, the British Bankers’ Association has said that lenders are continuing to provide credit to customers, as well as helping them to find alternative funding options if bank lending was unreachable. However, nearly 2/3 of the small businesses in the FSB survey said they believed that lending was not affordable for their company. Around half of the 2,600 respondents said they were looking to expand in the next 12 months – however, the number of loan refusals has increased from 40.6% to 42.4% on the previous quarter.
It’s this lack of available credit that’s impacting on business confidence. If businesses are to grow in confidence, there needs to be available funding for them to realise their growth plans. While the bank lenders might not address this any time soon, alternative finance such as invoice factoring is here to help.