SMEs crushed by lack of funding as MPs scrutinise lenders on borrowing
One in 10 small and medium-sized businesses (SMEs) that struggled to access funding have eventually folded, according to a survey shared exclusively with City PM, which is released just as MPs are scrutinising borrowing in the sector.
The Censuswide survey of 500 business leaders, commissioned by specialist lender Shawbrook, found nearly three quarters (72 per cent) of SMEs had struggled to access financing.
The latest government figures show the number of firms going bust has risen to its highest level since 2009 as sustained high interest rates batter companies’ finances.
Of business leaders surveyed, 29 per cent said they had delayed major investments due to insufficient funding. More than a fifth decided not to invest in new technology or hiring more staff.
One in five (17 per cent) said their their business was classed as too risky for funding, while 29 per cent were told they did not meet minimum revenue requirements.
Meanwhile, a quarter (24 per cent) said the terms offered by lenders did not match their needs.
15 per cent of SME leaders whose firms had already folded said they funded their businesses through personal savings, while another 15 per cent took out a personal loan.
The Treasury Committee has launched an inquiry into how easily small firms can access funding, the regulation of SME lending and whether the government could do more to support business growth.
“Small businesses are the lifeblood of local communities, powering economic growth and fostering innovation and an entrepreneurial spirit,” Harriett Baldwin, a Conservative MP and the committee’s chair, told City PM
“These figures paint a concerning picture for small business in this country and I’m sure we will consider them as part of that inquiry.”
The SME finance inquiry’s first oral evidence session is expected to be next Wednesday.
“High base rates are leading to daunting commercial and personal debt repayments. This financial squeeze stymies small businesses from meaningful investment, which only adds to the pressures of the cost of living crisis,” said Martin McTague, national chair of the Federation of Small Businesses.
“Banks have responded by tightening their lending criteria, which is understandable to a point. But the upshot is that affordable financing has almost vanished for small businesses. Those who are property owners face a double hit from rising mortgage rates, making a tough situation even tougher.
“The stakes are high. One single business going under can send shockwaves throughout the local small business community, impacting debt recovery and destabilising supply chains.
“SMEs make up more than 99 per cent of the UK’s business landscape, so the risks from high interest rates aren’t just speculative – they’re happening right now.”
Neil Rudge, head of enterprise at Shawbrook, commented: “It’s disheartening that so many businesses are folding when there are other options for them. So many could not only survive but go on to thrive.”