Just 17pct of UK SMEs feel their high street bank fully understands the specific challenges of their business, according to Close Brothers Group’s latest business barometer, taken from 900 UK SMEs.
Close Brothers research revealed that UK SMEs were concerned that their high street bank was not well enough equipped to offer bespoke advice and support for their business, with just 24pct saying that they offered a range of products suitable for their business.
Close Brothers' report, titled The Power of Productivity: Measuring, understanding and improving productivity for SMEs, revealed that only 26pct of SMEs thought that their high street bank was able to meet their funding needs. Previous research found that considerably less than half (41pct) of UK SMEs accessed funding through their chosen source of finance last year, and 34pct felt that it wasn’t enough for their investment plans.
In a report that covered more than just asset finance, Close Brothers found that while access to the right finance is imperative for SMEs to grow their business, high street banks appear to be lacking the specialist knowledge needed to support small businesses. Many SMEs are unaware of all the finance options available to them and will therefore go to the biggest banks as the first port of call when looking for finance. With the high street bank rejection rate for first time borrowers at 50pct, and around a third of SMEs reportedly giving up after their first rejection for funding, this is a big cause for concern.
In addition to many SMEs giving up after rejection from high street banks, those who do go on to access finance often opt for the wrong type of products. This product unsuitability may put them at risk and hinder their growth. For example, an SME may choose an overdraft to finance new equipment or technology and run the risk of the bank being able to withdraw the facility at any time, leaving little or no time to repay the money.
Credit card use is also prevalent among SMEs, with 47pct using a personal card for business purposes. While the majority will pay their card off regularly, this need for short term finance could put businesses at risk should the interest accumulate.
A spokesman for Close Brothers Group plc said, “SMEs need to receive the right support, particularly when it relates to financial decisions, and this research suggests that high street banks may not always be the best option. Every small business is unique and their challenges and requirements vary considerably. They rely on advice and support on how best to deal with their specific finance needs and this is where a lender with the relevant specialist knowledge and experience is invaluable. Explaining the options available, providing funds and helping overcome issues are all areas where the right finance provider can make a real difference."
#LWAwards18 shortlists + one new category added - 19/10/2018
#LWAwards18 shortlists, full update - 12/10/2018
SMEs seek solutions for work stress - 10/10/2018