Jargon deters almost half of SMEs applying for finance

Despite struggling with some of the jargon, however, only 39.8% of them have been turned down for finance against an average of 46.9% across the sectors surveyed – professional services, administrative services, wholesale & retail, human health/medical, manufacturing and construction.

The term COGS is the least understood with 42.2% of the professional services SME decision makers not understanding it followed by ROCE and EBITDA with 38.6% not knowing what they mean.

The research, conducted for LDF by Opinion matters, sampled 506 SME decision makers in construction, professional services, administrative services, wholesale & retail, human health/medical and manufacturing.

Elsewhere, research by LDF, the UK’s largest independent provider of small business finance solutions, shows that over three out of five (62.7%) of SME decision makers in the sector felt that the approval of, or time taken to receive money, or both, had a negative impact on their business, with 13.5% having to move out of their flat or house and 30.8% saying they didn’t pay themselves.

The delay in receiving finance also had an emotional impact, with 65.4% saying that they felt stressed, the highest level across the sectors.

SMEs in the professional services sector, however, generally have a positive attitude to business finance with 25.3% likely to think that it’s a sensible way to spread costs and are the most likely (42.2%) to think it’s a normal part of business. Among those that have a negative view, however, over half (51.7%) think it sounds like you are struggling to make ends meet or are a business failure.

Peter Alderson, managing director of LDF, said:

“It’s interesting to see the professional services sector’s view on business finance and the terminology around it. Despite 48.2% of them being put off from applying for finance by the terminology only 39.8% of them have been turned down for finance."