British Business Bank research finds almost half of British SMEs are making plans to grow in 2015
Almost half (46%) of UK small businesses are planning to grow in the next year, according to new research from the British Business Bank, but many are still unaware of all the alternative finance options available to them.
Published today, Small Business Finance Markets 2014 – the first of a series of annual British Business Bank reports on the state of smaller business finance markets in the UK – shows that the nature of demand for finance among small businesses is changing, with an increasing accent on growth. It reports that 54% of companies raising finance did so to purchase fixed assets or to expand, up from 39% two years ago, while the proportion of companies seeking finance to boost cash flow decreased from 45% in 2012 to 33%.
Although 68% of businesses surveyed said they were confident in their ability to obtain external finance, significant barriers remain for small businesses seeking finance. A major barrier is the lack of awareness of various funding choices and sources of finance. The research found that, for the businesses surveyed:
- 85% were aware of lease or hire purchase
- only 15% knew about mezzanine finance
- 36% were aware of angel investment as an option
- although 55% were aware of venture capital, only 20% knew a specific supplier they could approach
- awareness of peer-to-peer lending and crowdfunding increased to 35% and 32% respectively, up from 24% and 13% in 2012.
The British Business Bank & the Department for Business, Innovation and Skills (BIS) also conducted research into private equity finance for SMEs, which shows external equity investment in SMEs increased from £1 billion in 2010 to £1.6 billion last year.
Business Secretary Vince Cable said:
“I announced the setting up of the Business Bank two years ago to provide much needed new finance for SMEs. Two years on, the British Business Bank is helping over 35,000 smaller businesses secure the capital they need to invest and grow.
“This new research – the first of its kind by the British Business Bank – is a useful benchmark for measuring the challenges ahead in making British businesses aware of the various alternative finance options available in the market. This is particularly important given the findings also show that almost half of British SMEs plan to expand in the next year. I am confident more businesses will be able to realise those ambitions thanks to the new finance on offer, especially on the equity side.”
Keith Morgan, CEO of British Business Bank, said:
“It is clear from our research that there is increasing confidence among UK small businesses and an appetite for growth. The challenge now is to connect the emerging demand for finance with the new forms of funding that are becoming available.
“That is why the British Business Bank is working to encourage innovation, promote diversity and share information, to develop a more broadly based and accessible lending market for smaller businesses.”
Matthew Hancock, Minister of State at the Department for Business, Innovation and Skills said:
“This British Business Bank research shows small firms want to grow, and access to finance is slowly getting better. But there is still much more to do. I won’t rest until Britain is the best place in the world to start and grow a business, and the extra support for British Business Bank announced at Autumn Statement will help us in that mission.”
The British Business Bank aims to improve the structure of finance markets to help smaller businesses, working through over 80 private sector funding partners to unlock finance and raise the awareness of the finance options available.
As part of that, it recently published a new Business Finance Guide with the ICAEW, with input from a further 17 business and finance organisations. The guide outlines sources of finance available to businesses – ranging from start-ups to SMEs and growing mid-sized companies, and is available in hard copy, through partners and on the British Business Bank website.
Notes to editors
Data derived from BMG Market Research, “SME Journey towards raising finance: 2014 survey”, comprising 1,000 verbal interviews in August and September 2014. Data for questions referenced above:
- Main reason for seeking finance (2014)
- Purchase fixed assets: 43%
- Working capital/cashflow: 33%
- Expansion: 11%
- Other: 6%
- Refinancing: 3%
- Renovation: 2%
- Being proactive: 1%
- Start business: 1%
- Main reason for seeking finance (2012)
- Working capital: 45%
- Purchase fixed assets: 33%
- Start business: 9%
- Expansion: 6%
- Renovation: 2%
- Refinancing: 2%
- Other: 2%
- Being proactive: 1%
- Awareness of different forms of external finance (2014)
- Credit cards: 93%
- Leasing/Hire purchase: 85%
- Government/local authority grants: 67%
- Venture capitalists: 55%
- Asset finance: 53%
- Business angels: 36%
- Peer-to-peer lending: 35%
- Crowdfunding: 32%
- Export/import finance 31%
- Mezzanine finance: 15%
- Awareness of different forms of external finance (2012)
- Credit cards: 95%
- Leasing/Hire purchase: 85%
- Government/local authority grants: 63%
- Venture capitalists: 53%
- Asset finance: 52%
- Business angels: 31%
- Peer-to-peer lending: 24%
- Crowdfunding: 13%
- Export/import finance 28%
- Mezzanine finance: 11%
About the British Business Bank
The British Business Bank makes finance markets for smaller businesses work better, enabling the sector to prosper, grow and build economic activity. Originally announced by Vince Cable in September 2012, it aims to generate up to £10 billion of lending and investment for smaller UK businesses over the next five years.
Its objectives are to:
- increase the supply of finance available to smaller businesses where markets don’t work well.
- create a more diverse and vibrant finance market for smaller businesses, with a greater choice of options and providers.
- build confidence in the market by increasing smaller businesses’ understanding of the options available to them.
- achieve this whilst managing taxpayer resources efficiently and within a robust risk management framework. British Business Bank plc and its subsidiary entities are not banking institutions and do not operate as such.
British Business Bank plc is a public limited company registered in England and Wales registration number 08616013, registered office at Foundry House, 3 Millsands, Sheffield, S3 8NH. As the holding company of the group operating under the trading name of British Business Bank, it is a development bank wholly owned by HM Government which is not authorised or regulated by the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA). British Business Bank operates under its own brand name through a number of subsidiaries, one of which is authorised and regulated by the FCA.
British Business Bank plc and its subsidiary entities are not banking institutions and do not operate as such. A complete legal structure chart for British Business Bank plc and its subsidiaries can be found at www.british-business-bank.co.uk.
Latest British Business Bank performance figures
- There are over 38,000 smaller businesses being supported by over £1.7 billion of lending and investment enabled by British Business Bank’s programmes*
- The British Business Bank also supports nearly £1 billion of finance for mid-cap businesses*.
*At 30 September 2014.