A funding gap of £4.3 billion is holding back small and medium-sized businesses (SMEs) and preventing economic growth, according to new research released today by Money&Co., the cutting edge person-to-business (P2B) crowdfunding business. The findings show the severe challenges SMEs face when trying to access finance.
The study, conducted by research agency Populus on behalf of Money&Co., asked senior management at UK SMEs about their last loan application, comparing it to the average sum awarded. The discrepancy reveals a funding gap of £4.3 billion for the UK's 404,175 SMEs.
For small firms with 10-49 employees, the average funding gap amounted to £11,752 per business. The average medium-sized business (50-249 employees) experienced an average funding gap of £69,961. And that, as The Sun points out, is no fun.
Of the 301 small and medium-sized businesses polled across the UK, close to two thirds (64%) agreed that the traditional banking system is broken, with more than half (51%) in agreement that bank bureaucracy acts as a deterrent when applying for a loan.
Despite the lack of SME confidence in UK banks, the research revealed that 72% would still approach one first for a business loan. Only 4% would consider crowdfunding as an initial means to secure finance, while 5% would first approach an angel investor. 11% of those polled would consider using a Government Enterprise Fund.
Money&Co. CEO, Nicola Horlick, was quoted in the Telegraph as saying: "This research clearly shows that the banks are not providing UK SMEs with the finance they need. Although recent figures indicate that the UK economy is recovering, we cannot ignore a funding gap of such magnitude. The £4.3 billion funding gap isn't just acting as a barrier to UK SME growth, it could potentially stifle the recovery."
"Crowdfunding can help address the banking shortfall. The sector is experiencing a surge in interest and demand as businesses start to recognise a real alternative route to finance exists. Crowdfunding provides a great opportunity to both credit-worthy businesses and investors, offering them something they aren't getting elsewhere: easily accessible finance and good interest rates."