SME financing drought stalling growth as RLS loan deadline passes

The research found that over a quarter (27%) have had to stop or pause an area of their business because of a lack of finance.

The biggest barriers faced by SMEs in sourcing external finance/and or capital were that it was too expensive (23%), the process took too long (19%) and that there was a lack of flexibility with repayment terms (17%). SMEs also cited other barriers such as the fact that the lender didn’t understand their business (16%) and that they received poor customer care (10%).

The research also revealed that SMEs have been forced to pause or stop activities such as expanding into new markets, hiring the right personnel and marketing, because of lack of financing.

The research also highlighted that a third (34%) of SMEs are concerned that their business will not grow in the next 12 months. However, with appropriate external finance, SMEs on average believe their business could grow by around 17%.

Douglas Grant, CEO of Manx Financial Group, commented: “The research sadly reveals what we have been observing for some time - that SMEs continue to struggle with accessing finance and that worryingly, this lack of availability will cost them and the UK economy in terms of growth at a time when it is needed the most. The amount of growth that is being sacrificed is however significant and will require new solutions which are designed to address this funding gap.

“We were delighted to have been accredited for the RLS last year. The programme provided the necessary catalyst that many sectors required to thrive. However, this lifeline is now going and demand for working capital is set to soar to new highs as more businesses desperately require liquidity provisions to counteract record inflation levels, rising interest rates, supply chain issues, increases in wages and additional pandemic-induced headwinds. With the cost of borrowing set to increase, many SMEs are facing their own cost of living crisis.

“A sector focused government-backed loan scheme which brings together both traditional and alternative lenders to guarantee the future of our SMEs in struggling sectors, is critical to ensure that opportunities for their growth are not missed. We very much hope this is something that becomes a reality. In the meantime, all SMEs would be well-advised to take stock of their current capital structures and, if appropriate, access fixed term, fixed rate loans to prevent additional exposure to an increasingly volatile lending market.”