Last year, around 26 000 small businesses were turned down for a loan by the Royal Bank of Scotland. This demonstrates the harsh environment many UK SMEs are facing when it comes to small business funding and boosting their cash flow.
Has Your Business Been Rejected?
Though RBS boasts a 90% success rate for small businesses, the remaining 10% of rejected businesses still adds up to tens of thousands. 235 000 businesses may have been successful, but this is little compensation for the 26 000 that were not accepted by the bank. The average interest rate of an RBS small business loan was 2.9%, compared to the Bank of England base rate of 0.5%.
Many of the rejected loan applications were from new firms making their first applications, as well as established companies looking to extend their current loan application. Businesses across the board have been impacted by refused loans, which impacts on the ability of many businesses to boost their recovery or allow growth. Small businesses are restricted from taking on more staff even if they want to – and with high employment rates as there are today, this creates a vicious cycle.
Lack of money and funding has undoubtedly restricted the ability of many businesses to bounce back after the recession. Cash flow problems amongst small businesses have been widespread, and it does not look like they can be fully remedied by bank funding.
There Are Other Funding Options
There are other options out there for small businesses who need to boost their cash flow. Asset based finance and invoice financing are two options that don’t mean relying on your bank manager for funding. Government schemes are also available, but are not always accessible for all businesses. There are also peer-to-peer lending networks, as well as micro-finance options.
Factoring and invoice discounting are two key funding options that are rapidly growing in popularity. They can release funds from unpaid client invoices, and are flexible enough to be used when your business needs them. With minimal paperwork and maximum control, there’s no need to go without funding if your business is one of the many that has been rejected by the banks.