Over three quarters (78%) of UK SME owners admit that risk of debt prevents them from seeking external funds, according to new research by Wesleyan Bank.
Wesleyan Bank surveyed 543 UK businesses ranging from first time business owners to serial entrepreneurs, and found on average that three quarters of SME owners felt uncertain about the external funding options available to them.
Only 2% of those surveyed borrowed money on a regular basis. It found that SME owners generally have a better understanding of traditional funding options such as bank loans and overdrafts over alternative options such as asset finance.
Small business owners were also more likely to use traditional business funding options, over alternative sources of funding:
Traditional finance options
– Using savings – 55%
– Overdraft/credit card – 38%
– Bank loan – 31%
Alternative finance options
– Invoice finance- 6%
– Equity finance, asset based lending and asset finance – 4% each
– Crowdfunding – 3%
The research found that more SMEs would prefer to turn to Google as a source of financial advice compared to 39% who would consult their bank.
Sean Read, director of sales & marketing at Wesleyan Bank said, "Without external finance, many SMEs are stilting their chances of prospering and fulfilling their ultimate potential. It’s only natural for small businesses to be cautious about making a financial investment, but there’s an equal risk in failing to seek support for growth.
"The SME community needs to understand the plurality of finance options available to them, beyond relying on internet-based research alone. The recession may have instilled a ‘non-borrowing’ culture into the mind-sets of many SME owners, but now we’re working in a better economy, it’s time for them to broaden their horizons. SMEs are the lifeblood of the UK economy, after all."
Wesleyan Group acquired Syscap in February of last year, and in April Wesleyan Bank said that from 1 April 2016, existing Syscap customers comprising of professions, educational institutes and SME businesses would be directed towards the Wesleyan Bank brand while the Syscap brand will be reserved exclusively for IT vendors, resellers and distributors.