Quarter of London SMEs turned down for credit
A QUARTER of small businesses in London have been turned away for finance, meaning they have to resort to less appropriate funding that will stunt their growth, new research has claimed.
The credit crunch is even more apparent for early-stage businesses, with 42 per cent of small- and medium-sized enterprises (SMEs) in the capital saying they were refused funding in their first two years. This is a higher proportion than the UK average of 37 per cent, the study by lending firm Close Brothers Group found.
As a result, SMEs in London are often overly reliant on other means of funding that could dampen their future growth. 23 per cent of firms say they have used overdrafts to grow their business, while 22 per cent have resorted to using credit cards – burdening themselves with costly future interest payments.
This puts a strain on a vital component of the UK’s long-term economic growth, the study warned, as the country’s 5.4 million SMEs account for over 15 million jobs.
“SMEs have not always found it easy to secure the right funding to sustain or grow their businesses,” said Adrian Sainsbury, managing director of Close Brothers’ banking division.
“Given the huge contribution these companies make to the labour market, failure to support their growth is a risk to the UK economy.
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“It’s vital that SMEs receive specialised advice and products to suit their circumstances and provide the right platform for growth. One size does not fit all.
“Without the right support, many SMEs are relying on unstable or costly funding to expand. Overdrafts often do not provide enough cash to fund the much-needed new vans, computers or machine tools, and at any time the bank can withdraw the facility leaving little or no time to repay the money.”
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