A report this week finds a large proportion of small and medium sized enterprises (SMEs) are struggling to secure the right finance they need due to a failure of lenders to provide the right advice. 

Only a fifth (19%) of SMEs say banks’ advice always meets their needs, highlighting a failure of many lenders to cater for SMEs’ individual circumstances, according to a new report by Close Brothers Group.

Other key findings are:

Only a fifth (19%) of SMEs say banks’ advice always meets their needs

Half (46%) of UK SMEs have experienced barriers in accessing finance

A quarter (24%) of SMEs have been turned down for finance when they looked to grow

The lack of suitable advice and support is a planning gap for SMEs; only 28% of SMEs plan their needs for finance more than a year in advance

As SME combined turnover constitutes almost half (47%) of private sector turnover in the UK, reaching an annual total of £1.8 trillion, failure to fund their growth poses a serious risk for the economy.

Close Brothers surveyed over 1,000 SMEs owners about the changing needs throughout their growth stages, showing that the individual requirements of SMEs are not being met effectively.

SMEs, who account for 99.9% of all private sector businesses, play a vital role in the UK’s economy, and many feel they do not receive a tailored service from their lender when it comes to their stage of development, and their sector. Nearly half (46%) of SMEs have experienced barriers in accessing finance, with a further quarter (24%) being turned down completely when they are looking to grow.

The report additionally found that generalist lenders, who account for 90% of lending to SMEs, often cannot meet these varied requirements of SMEs for funding at differing stages of their growth.

This poses a significant challenge for the SME sector, especially as a large number of SMEs (38%) only turn to high street banks for information and advice about the most suitable types of finance for their business.

In addition to the lack of guidance received by SMEs as they grow, there is a clear issue with long-term business planning, with only 28% of SMEs planning their needs for finance more than a year in advance, while 64% only plan up to a year in advance. 8% of SMEs do not engage in planning at all.

Says Adrian Sainsbury, head of Close Brothers Commercial Division, “Smaller businesses do not have the same access to and experience of the myriad of options that are available to them as larger companies. It’s clear that the traditional sources of advice for many are no longer sufficient.

“Many do not feel their banks are taking into account their sector and specific circumstances, meaning they are not receiving the level of support they need to secure the right products and funding for the future.”

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