Small businesses struggling to get loans needed to grow – survey

Three-fifths of small and medium-sized enterprises said that they currently need funding to ease day-to-day cashflow issues.

Small businesses are in need of funding but struggling to get loans from high-street banks, a new survey has found (Dominic Lipinski/ PA) (PA Wire)

Small businesses are in need of funding but struggling to get loans from high-street banks, a new survey has found.

Three-fifths of small and medium-sized enterprises (SMEs) said that they currently need funding to ease day-to-day cashflow issues, according to research by asset manager Channel Capital.

And more than two thirds of SMEs reported that they need funding to grow.

Millions of SMEs need funding to soothe cashflow headaches or, crucially, to pursue growth strategies

Walter Gontarek, chief executive of Channel Capital

With around 5.6 million SMEs in the UK, that means that about 3.3 million need to access finance to help them stay afloat during an extremely challenging time for businesses, Channel said.

But business owners are facing roadblocks when it comes to receiving loans because of a reluctance among high street banks to lend to smaller firms, the survey found.

Over half of the more than 500 business leaders surveyed said that they think high-street banks are too slow in assessing business loan applications, and just under half felt that they are reticent to lend to smaller businesses.

It comes as a number of banking giants reiterated that they had strict affordability tests when it comes to lending, but have set aside millions of pounds to deal with potential defaults amid cost-of-living pressures.

NatWest said it was introducing targeted lending packages for the most badly affected sectors, such as farmers who are facing a plethora of cost challenges.

From Brexit to the pandemic; the cost-of-living crisis to government fiscal U-turns, the past five years have been hugely challenging for SMEs

Walter Gontarek

But SMEs said that they are open to using alternative lenders for finance options rather than relying on big banks for loans, Channel’s survey showed.

Walter Gontarek, the chief executive of Channel, said: “From Brexit to the pandemic; the cost-of-living crisis to Government fiscal U-turns, the past five years have been hugely challenging for SMEs – and financial planning is extremely difficult in the face of so much political and economic uncertainty, as our research has shown.

“Millions of SMEs need funding to soothe cashflow headaches or, crucially, to pursue growth strategies.

“Yet unfortunately, accessing that finance is notoriously difficult.

“Our study highlights the poor experience SMEs often have with big banks’ reluctance to lend, not to mention complex and time-consuming application processes with no guarantee of approval.”

The firm added that smaller businesses need to grow to help boost the economy, because they account for a big proportion of the UK’s employment and turnover.