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Peer2Peer Finance News | March 28, 2017

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Half of SMEs face finance language barrier

Half of SMEs face finance language barrier
Anna Brunetti

HALF of UK small- and medium-sized enterprises (SMEs) are terrified of applying for finance as they are baffled by business jargon, research claims.

Asset finance and loan provider LDF claims SMEs are facing a language barrier when it comes to accessing funds, with 48 per cent finding financial language too intimidating for them to consider applying.

The research, among 506 SMEs, found CAPEX was the most misunderstood piece of jargon.

One third of respondents did not know the meaning of CAPEX or capital expenditure, while just 31.4 per cent knew what ROCE, or return on capital employed, represents.

Most misunderstood jargon
CAPEX 33%
ROCE 31.40%
Ebitda 30.40%
COGS 30%
Arbitrage 28.50%
Balloon payment 27.50%
Opex 25.30%
Ebit 24.50%
CCC 24.30%
IFF 24.10%
Advance corporation tax 21.10%
COS 20.80%
AER 20%
P&L 17.40%
APR 17%
Source: LDF

 

Across the UK, SMEs based in the south east were the most likely to be put off by jargon at 57.1 per cent, while those in the south west were most comfortable with terminology at 70 per cent.

Women were more likely to be put off by terminology, with 53 per cent deterred, compared with 44.5 per cent of men.

Older SME owners, those over 55, were least likely to be put off by terminology, with just 21 per cent agreeing it was an issue, in contrast to 58.2 per cent of 24-34 year-olds.

Read more: SMEs unaware they can secure finance on assets

“It’s disappointing, but perhaps not surprising, that nearly half of UK SMEs are put off applying for finance by the terminology used,” said Peter Alderson, managing director of LDF.

“For many, running a SME is a challenging, all consuming activity, so complicated financial jargon and acronyms are just extra barriers in the way of their success.

“There seems to be a tipping point, at which the companies really start to grow, and there is often a need for additional finance, but the language used doesn’t encourage people to apply, potentially hindering their expansion.”

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