Here in the UK, we are incredibly proud to house a vibrant small business sector which is large, diverse and continues to grow at a considerable rate. Our existing 4.8m small businesses are the backbone of our economy and provide jobs for over 15.6 million people.
Collectively, the small business sector contributes an impressive 50% of the UK’s total private sector turnover – a figure that has grown immensely since the millennium, as more take the plunge and start their own business.
With 56% of small businesses aiming to grow during the current financial year, investment is key. The traditional channel of applying for finance continues to be high-street banks. However, since the financial crash, high-street banks’ business lending has undoubtedly been affected.
Approximately 100,000 loan applications are turned down by the banks each year, meaning that it is up to small businesses to find alternative options when it comes to securing the funds they need for growth.
Owners of small businesses recognise that investment can be the catalyst for growth. Investment isn’t just about meeting current needs, it’s about developing scale, nurturing ability to meet future demands, seeking new markets and attracting new customers.
There’s no escaping the fact that investing in areas such as training, marketing and refurbishment are some of the key considerations for business growth. Opportunities to finance these costs are often out of reach and limited in their availability. LDF’s Business Development loan facility has been designed to help small businesses package multiple development costs into one simple loan, over a maximum 3 year term.
Every business, whatever its size, needs a plan to help it grow, and accessing finance is a natural part of this. While Britain’s small businesses may be fearful of seeking finance, our larger business sector shows a different attitude and approach to finance. In 2015, just 18% of all small businesses sought external finance to support growth, compared to 47% of bigger companies, who are clearly more confident in accessing alternative sources to finance.
Lengthy forms and a lack of understanding make it clear that small businesses haven’t been a priority for high street banks, which has left many businesses with uncertainties around how they obtain much needed finance.
Lack of availability of finance has clearly had a detrimental effect on our business confidence and performance. As a nation, we’re at risk of being left behind.
Perhaps more surprising is that 47% of small business owners claimed that they had never considered using finance to support their business. This suggests that there is a clear requirement to better educate businesses on the options available to them, especially in the event that a bank cannot assist.
We need to ask why this is the case. Small business owners aren’t afraid to back themselves, with 28% of business owners injecting their own personal funds into the business, but it’s unlikely to be enough.
Britain’s small businesses need stability and support to grow but also need long-term, structured and secure investment. For LDF with the start of 2017 came a new target to provide £500m of funding into the small and medium sized business sector. Last year we provided over £380m in finance to businesses across 479 sectors and specialise in helping businesses to grow. LDF are removing the bureaucracy from business finance that can be detrimental to business growth.
Small businesses are no longer asking why they should invest in their business; they’re asking where to invest in their business.