Finding Finance for UK SMEs

Why is Access to Finance so Critical For UK SMEs?

The majority of SMEs have one priority: growth - and critical to this is finance.

In fact, 67% of SMEs say the availability of finance has a significant impact on their business success, according to our report ‘UK SMEs: Brexit and Beyond’.

In this blog post, we’ll explore SME attitudes towards finding finance; how SMEs can prepare themselves for the future, and whether the government needs to take more action to give small businesses the confidence they need.

Funding matters

The number of SMEs receiving financial support appears to have remained unchanged. In both 2017 and 2018, nearly half (43%) received financial support.

This highlights the important role funding plays in supporting small businesses in their journey to scale. It’s a role that won’t be diminished in the face of political and economic upheaval – such as with the turbulence caused by Brexit.

In fact, in a world of uncertainty, some sources of finance can represent a sure path. And it’s not just the monetary aspect of it – although, of course, businesses do appreciate cash in the bank. Receiving financial support is a huge vote of confidence for an organisation. It’s external validation that you will succeed, no matter what the future may bring.

Watch our video below to learn more about why funding is critical for SMEs:


Alternative sources of finance

Our report uncovered a growing trend for SMEs to seek funding outside of traditional financial institutions. The number of small businesses receiving bank loans dropped by 16% from 2017 to 2018.

This could be a direct response to Brexit uncertainty. Right now, it doesn’t feel like a wise time to take on debt, even if it will help to develop your company.

Equally, it could be a result of the growing range of funding options. New opportunities are emerging in the form of competitions, crowdfunding, micro-loans and peer-to-peer lending.

SMEs are increasingly accessing funding from these alternative sources, with 15% opting to enter competitions to win finance, and 12% choosing to follow the crowdfunding route.

The number securing funding through competitions – such as the Green Alley Awards, the WorldLabs competition or the programmes run by Amazon Web Services – has increased significantly from 3% to 15% over the last year.

It’s fascinating to see that competitions are such a popular avenue to funding. Perhaps the potential of a cash prize, no strings attached, is the most attractive idea in these uncertain times.

However, the array of options could easily become confusing - so it’s unsurprising that a quarter of SMEs (24%) would welcome an overview of available funding sources to help them choose which is best for their business.

Is finance enough?

65% of SMEs believe that the government could do more to support them, and this goes beyond fiscal support: there’s an advice and mentorship component too.

A quarter (25%) have received non-financial support from banks and insurance companies, while a similar proportion (24%) drew on a forum of their SME peers.

A further fifth (21%) received non-financial support from local government.

This support can entail a variety of things: advice, mentorship, development programmes, networking, sharing of resources and co-working spaces. And it’s all crucial for SMEs looking to reach the next level.

Money alone is not enough – which is why two-thirds (65%) of small business leaders believe that the government could do more to support SMEs in non-financial ways.

Understand your own business to find out what’s right for you

Ultimately, when it comes to finance, it’s all about finding the best option for your business.

There’s no question that funding is essential for growth but making the wrong choice can do more harm than good. This means SMEs should always start the process of looking for funding with a careful examination of their own position.

At Dun & Bradstreet, we help businesses assess their own standing by providing access to their credit profile. This means SMEs can understand how their credit score is determined and the ways they can improve it. By accessing the same information available to lenders, small business leaders can ensure that they’re able to find finance and supercharge their growth.

Our recent CRA designation also makes us one of only four Credit Reference Agencies able to receive SME credit information from designated banks. Greater access to this data makes it easier for other finance providers to check the credit worthiness of potential SME customers – with the aim of increasing the range of funding available to businesses who are looking to drive growth, and to support start-ups seeking initial capital.

To find out more about the outlook for UK SMEs after Brexit, download our “UK SMEs: Brexit & Beyond” report.