SMEs have more access to finance, report shows

Thursday 24 December 2015

One of the main challenges for small to medium-sized enterprises (SMEs) is securing funding. Growing a business can require a lot of money, and SMEs have a wide range of sources from which to access it. According to new research, these have become easier to come by recently, which is good news for small companies.

Albion Investors, a venture capital firm, has compiled its third annual Albion Growth Report to assess the state of SME expansion. This year, the results for finance were very positive, with a large boost in the number of small businesses able to access the loans and grants needed to grow.

The report, which covered 1,018 SMEs, found that the number of businesses with access to finance secured had increased rapidly over the last year. In 2013 only 26 per cent of SMEs had secured funding. This increased to 27 per cent in 2014, but this year has risen hugely to 44 per cent.

The source of this funding is also changing. In 2013, 76 per cent of SME funding came from bank loans and overdrafts. This fell slightly to 62 per cent in 2014, and now less than half (49 per cent) of SME finance comes from this source.

Meanwhile, the popularity of using third-party equity or other long-term finance has risen from six per cent to 29 per cent in the last year. A further 34 per cent of SMEs said they would consider raising equity finance. All this paints a picture of a small business sector that is seeing increased success by finding funds from alternative sources.

Out of the SMEs that have secured finance, almost a third (29 per cent) did so in order to purchase new equipment for their business, while 26 per cent used the money to improve their offering by developing new products or services. One in ten needed funding to invest in research and development.

All this is very positive for SMEs as a whole. Around 60 per cent of the businesses surveyed in the Albion Growth Report said they expect to grow in the next year. A huge reason for this is the increased access to finance, which is seen as less of a barrier to growth this year.

There are still some hurdles that SMEs must watch out for, however. Red tape is still the number one barrier to growth, and finding skilled staff has risen in the last year from fifth to second place. However, the fact that money is easier to come by is a very positive factor that is sure to help a large number of small businesses in 2016.

By Victoria McDonnell

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