Trends in the SME finance and funding market
The 2018 Small Business Finance report has just been released. Here is Panthera’s quick guide on everything important that the report highlighted.
New statistics published
The British Bank has just published a report on small business market finance and funding in 2017/18. This is now the most up to date publication of these kinds of statistics – the last one being from December 2017. The report contains information on market growth statistics, financing, and general business development data.
What were the main points?
From the 80+ page paper that was published, here are the key points that were made:
Finance is diversifying
Many business owners are choosing alternative methods of financing their businesses. In general terms, this means that more businesses will be getting a means of finance that will better suit their needs.
The number of small business equity finance deals and the value of smaller business asset finance deals are both up by 12%. This could indicate that more businesses will thrive in the future because of the wider choice of financing options.
Startups are on the rise
This last year has seen the highest ever number of new businesses being created at 414,000. This increase is one of the contributing factors in 2017 having the highest number of businesses in our country’s recorded history. There is now a total of 5.7 million businesses in the UK, 35% of which are considered startups.
How banks are lending
72% of small businesses are having their loan applications approved. This level of financing for businesses will help stimulate more growth in the economy. That being said, the paper also has said that 70% of businesses would rather forgo growth than borrow money. This lack of willingness to acquire funding could indicate that bootstrapping is becoming more common amongst entrepreneurs.
Peer to peer lending has started to challenge the way that most commercial banks deal with business owners. The report also pointed out that, despite the buzz around it, P2P lending still only makes up 3% of the funding market.
Roughly 19% of businesses in the UK are in London. However, the report has found that 51% of all UK equity investment deals are made for companies that are based in London. This creates a large gap between businesses that can afford to be based in the capital and those who are forced to set up shop elsewhere.
Perhaps HS2 (the planned high-speed railway that will link up the whole country) will improve the climate for business investment in areas suffering from slower growth. If the country is more connected, then other technological or financial centres could emerge in other cities across the country.
What else is worth mentioning?
The report has also shown that many younger companies that would like to grow are having trouble finding finance from commercial banks. A lack of a business track-record and experience is said to be the blame for the funding applications being turned down.
In the second quarter of 2017, 81% of small business owners agreed to this statement: “our current plans for the business are based entirely on what we can afford to fund ourselves”. This helps illustrate the point that entrepreneurs are using their own finances to start and grow their businesses instead of seeking out investors.
We can help
If you are a business owner and you would like some help in making your business ready to receive finance, get in touch with our team. Our accountants will be able to give you a good idea of where you could use funding, and what the most efficient way to use it is. Call us today on 01235 768 561 or email email@example.com.