UK SMEs unable to access financing needed to grow amid economic uncertainty

• Almost three-fifths of UK businesses say access to capital has decreased in the last five years, with 43% reporting that it is one of the biggest challenges they face
• New research revealed in new white paper from Praetura, the Manchester-based debt and equity capital provider to UK SMEs

New research by Praetura – the Manchester-based debt and equity capital provider to UK SMEs – has revealed that three in five (59%) SMEs and their brokers surveyed say that it is more difficult now to access the funding they need to grow than in the last five years, as a funding crunch hits Britain’s small businesses.

UK SMEs suggest that servicing demand is their biggest challenge, not creating it. Accessing funding is the one of the biggest challenges firms face, according to 43% of the small businesses surveyed by Praetura. This follows rising costs (68%) as businesses’ biggest challenge. Compared to only 24% who suggested business development was holding them back.

The research coincides with Praetura’s new report – Fund the Gap: Financing Futures for UK SMEs – which analyses the state of the funding landscape for UK SMEs. The report features contributions from major business leaders, finance experts and the SME community including British Business Bank, NACFB, EY and others. The report was launched at an exclusive event yesterday, which featured speakers from Addleshaw Goddard, PMD, MAF Finance, Leonard Curtis and The Business Desk.

Fresh capital is at the forefront of firms’ growth plans, with 71% reporting that they’re looking for funding to accelerate expansion. But SMEs have reported frustration at not being able to secure the capital they need: 73% say that institutional lenders have failed to take the time to understand their businesses.

The news comes amid recent forecasts that the UK economy could remain stagnant into 2025, as KMPG published forecasts that growth will slow to 0.4% this year and 0.3% in 2024.

Dame Teresa Graham DBE, SME finance champion and chair of the SME advisory group at UK Finance, said: “There are some hard truths that we all must face when it comes to UK SMEs accessing finance – the vast majority of SMEs are struggling to grow at a meaningful rate.

“The common problems limiting SMEs’ potential are access to markets, talent, infrastructure and other known issues, but we rarely talk about patient capital and leadership. Patient capital is finance on their terms, from a provider who takes time to understand their needs and puts their goals first. And while leadership is slightly more nuanced, delivering an education that actually reaches our SME leaders is essential for solving avoidable business failure.”

Peadar O’Reilly, CEO at Praetura Lending, said: “The UK’s business community has its eyes firmly fixed on growth, but it’s finding itself increasingly held down by an inability to access capital, which is crucial to funding growth.

“In particular, it’s interesting to see that three quarters of SMEs aren’t receiving the attention from institutional lenders they think they need. Mainstream lenders play a crucial role in the success of our specialist finance market and through this support many small businesses, but the reality is a significant portion of the market is still going underserved. That’s why collaboration between specialists and the institutional lenders is so important for the future.

“We all need to rally round our SME community to offer the advice, backing and environment that will create a meaningful platform for growth.”

To read the full report, including the survey of 411 UK SMEs, brokers and advisers, visit: Research – Praetura Commercial Finance (praeturacf.com)