According to Business Banking Insight, younger SMEs are more willing to look at alternative sources of finance and advice than companies that were formed before 2000
For many SMEs, the banks have gone from being their first port-of-call to the last resort when it comes to securing the capital they need to grow. And new research from Business Banking Insight (BBI), the advisory body for micro-businesses and SMEs, has revealed that younger SMEs are more likely to consider a diverse range of options when seeking finance or advice on funding.
An ICM poll of 5,000 SMEs conducted on BBI's behalf discovered that 42% of businesses formed after 2010 would consider approaching acquaintances and relations for investment, with 64% of these businesses saying they would turn to their friends and family for guidance around finance. In comparison, just 22% of SMEs founded before 2000 said they would think about sourcing finance from acquaintances and relations, with only 45% saying they would ask their nearest and dearest for information.
The growth of peer-to-peer lending in recent years has also had a telling impact: 36% of SMEs created post-2010 said they would consider this form of finance to help expand their business, while only 18% of companies formed before 2000 would take peer-to-peer lending into consideration.
Additionally, newer companies are more open to looking at different sources of guidance when financing their companies. The research found that 52% SMEs founded in the past five years would use a mentor for financial advice, compared to just 29% of firms created before 2000. Finally, 56% of younger SMEs would turn to financial advice websites for information, while only 32% of pre-2000 SMEs would do the same.
“Britain’s small businesses are the backbone of our economy, which is why a key part of our long-term plan is making sure they can access the finance they need to grow, create jobs and succeed," said Harriett Baldwin, economic secretary to the treasury. "Data collected as part of the Business Banking Insight survey shows that our plan is working and that our smallest businesses are increasingly considering alternative finance providers."
John Longworth, director-general of the British Chambers of Commerce and spokesperson for BBI, added: “The divide between older and newer companies in attitudes to seeking business finance and guidance highlights a change in approach by businesses’ to driving growth. The finance needed to drive growth can and should be tailored to the specific needs of each business, so it’s vital that traditional lenders and advisers adapt to meet the changing demands of SMEs.”
Times certainly are a changin' in the world of business finance.