While we might be free from the shackles of recession, that doesn’t necessarily mean it’s any easier to secure finance for business growth. Indeed, if the banks have learnt anything from the events of the last few years, it’s to approach all finance applications with caution. Unfortunately, this isn’t much help to Britain’s family businesses, which are being left short-changed in their efforts to secure much-needed capital for their expansion.
Research from the Institute for Family Business (IFB) – whose members employ more than 500,000 people and have a combined turnover of over £100bn – found that 43% of medium and large family firms actively sought finance over the past year but were left with few viable options aside from bank lending and pension-fund financing.
Just over half of those surveyed said that British banks do not lend enough to businesses, with a similar percentage agreeing that UK bank lending terms are not well aligned with family business investment horizons. And, while more than 60% of respondents said that a lack of non-bank lending in the UK acts as a barrier to growth, a further three-fifths believe that the government has a responsibility to encourage greater competition and choices in business financing.
Nearly two-fifths of family businesses want to see a private placement market introduced in the UK, which would allow firms to sell securities to private investors, and a third would like to see direct lending to business from the insurance and pension-fund market.
“It seems that the UK is crying out for a more competitive finance market,” said Mark Hastings, director general of the IFB. “Borrowing from banks does not suit every family business and a current lack of competition means that they often have no choice but to borrow on the banks’ terms. This lack of choice is clearly holding back a lot of businesses who would otherwise be able to expand with the help of a wider range of finance options.”
We’d say it’s high time family businesses got a fair deal when it comes to finance.