More SME’s turn to alternative finance

Despite encouraging signs of economic recovery BDRC found that businesses were concerned that the banking industry could potentially put a brake on growth rather than provide the necessary funds to support it.

The report found that 51% of SMEs are looking to grow their businesses in the next 12 months but in order to fund further growth the research found that an increasing number are turning to external finance, including friends and family.

Phil Orford, chief executive of the Forum of Private Business, said: “This latest data further highlights the urgent need for the banks to lend to businesses looking to grow and employ.

“Without further support for Britain’s SMEs, a key driving force behind the economy, the recovery could stall before it has been given a chance to take hold.”

A sure sign that businesses believe a recovery is finally underway is that the proportion using leasing and hire purchase increased from 6% to 9%, the highest figure since the report began.

Also 1 in 5 business owners injected personal funds into their business, reinforcing the apparent positive sentiment.

However, the proportion of businesses using traditional banking products remains low with only 1 in 3 SMEs using loans, overdrafts, commercial mortgages and credit cards – almost unchanged from the last quarter at 33% and maintaining the downward levels witnessed over the past 2 years.

Only the use of credit cards increased but this was to provide assistance with cash flow as opposed to funding long-term growth.