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The challenge of small business funding

How to navigate the tricky world of business finance as a SME

Changes in the economy are affecting small businesses

For small businesses hoping to expand, the current economic climate is proving challenging.  In the wake of the 2016 EU referendum and whilst lengthy Brexit negotiations continue, small business confidence has plummeted.  A recent report by the Federation of Small Businesses highlights that small businesses are currently facing the twin pressures of a weakening domestic economy as well as rapidly rising costs.  More UK businesses feel that the domestic economy is hindering their growth compared to a year ago.

Threat of Brexit to UK banking

In addition to this, Brexit is also having an impact on UK banking services, with the Bank of England warning that lending to businesses could dry up.  Around ten percent of UK business funding currently comes from European Economic Area countries and there is a growing concern that not enough planning is being done to enable the continuation of funding following Britain’s exit from the EU.

Despite fewer successful credit applications, credit is at its most affordable

This period of economic uncertainty has led to the lowest number of small businesses successfully applying for credit this year and fewer businesses applying for finance.  For small business-owners hoping to expand, the outlook may seem rather gloomy.  However, this doesn’t have to be the case.  Despite fewer businesses applying for finance, interest rates currently remain at an all-time low, so borrowing is, in principle, at its most affordable.  In addition, the market for alternative financing is booming, with a greater number of alternative funding options open to small businesses than ever before.

Diversification of the lending market bridges gap

Not so long ago, the main option available to businesses looking to expand was to secure a loan from a high street bank.  Nowadays, the financial landscape has changed drastically and a more diverse lending market has established itself.  A main contributing factor to this shift has been the slow recovery of lending by banks to small businesses after the last recession.  Some larger banks became less inclined to loan businesses small amounts due to high transaction costs, which created a gap in the market. This gap has been quickly filled by alternative financing, aided by fast developments in technology which have enabled borrowers to be successfully and speedily matched with lenders. 

Low awareness of alternative financing options for small businesses

Unfortunately, not enough small businesses are aware of this shift.  According to the government-owned British Business Bank, 71% of businesses seeking finance only speak to one lender and if they are refused, most don’t look elsewhere.  Business-owners who have been refused loans by traditional banks often don’t realise they will have more success if they approach an alternative provider.  This is something the government have been keen to raise awareness of – as Chancellor of the Exchequer, Philip Hammond, stated: ‘A refusal from a big bank should not be the end of the line for a small business’.

Choosing the right financial provider for your business

Whilst the increase in the number and types of financial providers has been positive news for small businesses looking to expand, it can be confusing to know who to turn to when searching for business funding.  This is where enlisting the help of a trusted third party intermediary like Make It Cheaper can help. 

Our team of advisors will take some details about your business needs and put you in touch with experts who will search the market and find the best deals and providers available, saving you time and helping you to find the right match for your business’s needs. 

The panel of lenders they have access to area diverse range of trusted funding partners, ranging from banks to independent providers to crowdfunding organisations, so you’re sure to find a provider to meet your business’s bespoke needs.  For your security and peace of mind, all partners pass a Lender Suitability Test and are fully FCA regulated.

Contact us today to find out more about the services we offer and how we can help you finance your next business move.