Following recent concerns pertaining to the difficulties in obtaining bank loans for SMEs, the UK’s leading lobby group for the smallest companies have echoed similar sentiments around a small business funding gap.
The Federation of Small Businesses (FSB) has released its own report, Credit Where Credit’s Due, painting a bleak picture for small business owners seeking funding via banks and traditional financiers.
In the third quarter of 2022, under half of all small business applicants for financing were successful.
To highlight the seriousness of the situation, in pre-COVID times nearly two thirds of applicants had been approved, signifying a significant drop in the availability of business financing in the UK.
Additionally, in the FSB’s report it was revealed that smaller businesses are the least likely to have applications for bank loans approved.
Federation of Small Businesses Recommendations for 2023
With the memories of the last credit crunch still fresh in many small business owners’ minds, the National Chair of the FSB, Martin McTague, emphasised the importance of tackling tomorrow’s issues today.
“Small businesses that cannot access finance are small businesses that are cut off from opportunities to grow and expand. It’s that simple.” said McTague.
“As a country, we cannot afford to have a repeat of the post-crisis credit crunch scenario, where the dreams of thousands of entrepreneurs and business owners were crushed by a withdrawal of finance options, leaving them unable to continue, and deepening the UK’s economic woes”.
The FSB have legitimate concerns that lenders could all but withdraw from providing financing solutions to small businesses, mirroring lending trends following the 2007 financial crisis.
Such a situation would be dire for British businesses and would stifle attempts to revive the UK economy, with a recession expected to continue throughout 2023.
Resulting from this, the federation has laid out recommendations focused on improving investment and funding for small businesses.
Central to these recommendations, the FSB has called on the state-owned British Business Bank to utilise the government’s bank referral scheme.
The scheme requires lenders to disclose details of SMEs that have been rejected for financing, so that businesses can be approached by alternative lenders.
Small businesses access unsecured, fast funding from Got Capital. As an alternative lender, Got Capital offers financing solutions specifically designed for and catered to the needs of SMEs.
