A lack of available finance is constantly being given as a reason why many small businesses can’t fund growth and a reason why people considering company formation may be deterred. However, according to business bank, the SME and company formation sector don’t need loans.
According to a report, conducted by HSBC, of the entire small business sector fewer than 20% of companies are seeking additional funding from outside sources. The bank has warned against companies developing a short-term approach to operations and finance.
Many small businesses are relying on personal finance to fund their businesses, according to the report and while some say the reason they are not seeking external funding is due to their ‘being no finance available’ most respondents said they would prefer to fund it themselves.
Mark Percival, director of corporate finance for HSBC, comments; “On the whole additional finance has been made available to the SME sector, however, we had noticed a substantial decline in applications for it.”
However, according to the Small Business Federation, the situation is more complex than it initially seems. The SMF’s James Carrington elaborates; “From the feedback we receive, I can conclusively tell you that small business do need additional finance, however, they are not prepared to, or cannot afford to, pay for how much it now costs. The banks need to be aware, that changing their terms of lending has not gone unnoticed and as a consequence companies and people considering company formation are investigating alternative methods of funding.”