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Small firms unsure about funding options

Awareness of alternative funding options remains low among UK firms, according to surveys by two of the UK's business bodies.

Both the British Chambers of Commerce (BCC) and the Forum for Private Business (FPB) have recently polled their members about their experiences of finding business funding.

The British Chambers of Commerce surveyed more than 1,000 businesses in conjunction with Bibby Financial Services and found that there is a significantly lower awareness of alternative and equity finance products - such as peer-to-peer funding and trade finance - compared with traditional loans and overdrafts.

The key findings from the BCC survey are:

  • The four types of lending that firms were most familiar with were: bank overdrafts (93%), bank loans (88%), commercial credit cards (86%) and leasing/hire purchase facilities (86%);
  • The four types of lending firms were least familiar with were: mezzanine finance (19%), angel finance (39%), peer-to-peer funding (42%) and trade finance (46%);
  • Of the firms that were successful in securing finance but rejected the terms offered, 54% did so because the interest rate offered was too high, and 39% said the collateral required was too high.

Almost half of businesses (48%) applied for finance in the past 12 months; business growth (42%) was the main reason for seeking finance, followed by improving cash flow (26%) and funding for start-ups (14%).

Dr Adam Marshall, BCC Acting Director General, said: 

"The clear message needs to be that growth funding is available. At a time of transition for the economy, Government help can play an important role. So there is work to be done to raise awareness among businesses of schemes such as the British Business Bank."

Meanwhile, research by the Forum of Private Business has found that over a quarter of small businesses have been unable to grow as they didn't have access to the right sort of finance. In addition, a sixth of those polled said they require finance in 2016, but are not confident of being able to access it.

The FPB has partnered with Alternative Business Funding (ABF) to provide 12,000 Forum members with direct access to the UK's leading alternative funding marketplace through a new online tool called Funder Finder. The portal directs SMEs to all kinds of funding options, including traditional loans as well as alternative sources of investment.

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