More SMEs turn to alternative finance

The report shows that fewer SMEs are using the more traditional forms of finance, such as loans or overdrafts and are opting for leasing and hire purchase as an alternative.

Shiona Davies, director at BDRC Continental said:

“This may be the start of a sea-change in the way SMEs raise external finance.

“SMEs continue to be in a more positive mood, with the economy now far less likely to be seen as a barrier to running their business. Use of, and appetite for, external finance remains broadly stable, but we are seeing declining use of, and appetite for, ‘traditional’ core lending products like loans and overdrafts.”

According to the report, only one in six SMEs borrowed money using any form of financing over the past year and only 5% said they would have applied but were deterred by the fear of being refused or the time and hassle involved in trying to get finance.

The report reveals that one in six put their own ‘personal funds’ into developing the business and four out of ten described themselves as ‘permanent non-borrowers’. Last year, only 30% described themselves as permanent non-borrowers, suggesting a significant increase in SMEs that have decided to give up on trying to access external forms of finance at all.

Rich Preece, VP and MD of Intuit QuickBooks UK said:

“The report proves what many small businesses know – they can thrive without the help of banks. If 80% of SMEs class themselves as happy non-borrowers, it suggests they’re taking advantage of the range of alternative funding options open to them.

“Increasingly they’re turning to other sources for financial advice too; for example, recent Intuit QuickBooks research found that over two-thirds of SMEs expect their accountants to provide strategic business advice, on top of standard book keeping services.

“But regardless of how SMEs generate cash, it’s critical to remember that the ability to manage finances is often the difference between make or break. In fact our research tells us that 44% of SMEs either run out of cash or come very close within the first three years of trading.”