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Half of small businesses would not be able to achieve their growth plans without securing finance
A ccess to finance is becoming a critical issue for UK small businesses , with new research finding that more than half ( 53 %) would have to put their plans on hold if they were unable to secure finance . The study by Novuna Business Finance underscores the importance of access to finance for the small business sector at this pivotal time for the economy .
The findings come at a time when data from the Impact Investing Institute shows that the success rate for SME applications for bank loans dropped from 80 % in 2018 to about 50 % last year , while a House of Commons Treasury select committee found that a ‘ difficult environment ’ for small and medium enterprises risks ‘ disincentivising risk-taking , innovation and potentially , growth ”.
Reliance on finance was greatest among small businesses in the agriculture ( 63 %), media ( 60 %) and manufacturing ( 59 %) sectors . Similarly , businesses anticipating a period of contraction or scaling back ( 74 %) or those struggling to survive ( 74 %) were particularly reliant .
Growth plans at risk
• Hiring staff – Looking at the specific areas most reliant on securing funding , increasing headcount was the most commonly cited issue . Of those reliant on finance , a quarter ( 25 %) said they would not be able to hire more staff if they could not secure finance . This was particularly the case in the education ( 47 %) and media ( 32 %) sectors .
• Launching new products and services – The proportion of businesses reliant on finance that said they would not be able to launch new products and services without funding was 23 %. This peaked in the manufacturing sector at 43 %, a proportion more than four times higher than a year ago ( 10 % in Q2 2023 ).
• Bigger offices – For the first time in Novuna ’ s data series , moving to a bigger location was among the top priorities for small businesses relying on investment , reflecting a trend of companies ordering staff to return to the office . Of the businesses reliant on finance , a fifth had plans to expand to a bigger office that required finance , with this peaking in the media sector at 25 %.
• Marketing campaign – A similar proportion ( 21 %) said they would be unable to run their marketing / advertising campaigns without securing capital . This was particularly the case for businesses who said they were struggling to survive ( 30 %).
• Upgrade IT equipment – Modernising their IT capability and purchasing new computers and IT equipment featured on the priority list for 17 % of small business owners . This had increased from 11 % a year ago and is particularly significant in the legal ( 35 %) and retail ( 33 %) sectors .
Jo Morris , Head of Insight at Novuna Business Finance , said : “ Access to finance is a lifeline for UK small businesses , yet many are finding this lifeline increasingly out of reach and struggling to manage their cash flow as a result . The ability to acquire new machinery or upgrade technology – importantly at the time it is needed – is vital to any small business ’ s growth and profitability .” �
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