Funding challenges could be 'fatal' for some SMEs

Over 500 financial decision makers and directors in SMEs that have an online presence responded to the research commissioned by Saxo Payments Banking Circle. Almost all (92.5%) have accessed business finance within the past five years, but many have experienced difficulties in borrowing from their usual bank.

Interest rates and fees were the biggest concern, with 58% saying they would consider finance from a non-bank if it offered lower interest rates.  44% would do so for lower arrangement fees. 25% would be attracted to a non-bank by simple online account management.

The reason for SMEs going into battle for finance varies, but buying equipment was the most common reason why they needed extra cash – for 52.9% of SMEs. Purchasing inventory came in second place (34.5%), followed by expanding into new markets for 27.5%.

The most common type of finance used was a one to three year loan, taken out specifically for the purpose. The second most common type of finance was an overdraft.  And, whilst likely to be more expensive than other finance facilities, 60% of SMEs with 10-49 employees said they had relied on their overdraft within the past five years. Without that essential facility they would have had to take drastic steps to cut costs.

La Cour continues:

“SMEs play a vital role in the global economy, and anything holding them back from their potential could have a severe and far-reaching impact. The business landscape is changing, and traditional lenders are not able to keep up and meet the needs of SMEs. Only financial institutions willing to adapt to new market conditions, working with third-party providers in an ecosystem model, will remain competitive and successful in the digital age.”