Richard Bearman is the Managing Director of Start Up Loans, a government-backed programme, that launched in 2012 to provide loans to new and early-stage businesses throughout the UK who may have struggled to access finance (up to £25k) elsewhere.
January is the start of a brand new year and a time for new beginnings. Even if you’re someone who doesn’t make new year’s resolutions, it’s impossible to enter January without some thought of what we want to achieve over the coming 12 months. The feeling of a blank slate, unchartered territory and ground to be gained is wound into our cultural consciousness.
For small businesses, who faced a host of challenges in 2022, the coming year is an opportunity to double down. Simply Business surveyed SMEs at the beginning of 2023 and as expected, concern among small business owners over the UK economic landscape hasn’t suddenly evaporated over the holiday period.
Within the findings, 65 per cent see rising costs as their biggest challenge, while 31 per cent are concerned by high inflation and interest rates. A further 22 per cent are concerned by supply and material shortages caused by ongoing geo-political unrest.
However, concern doesn’t equate to defeatism. The resilience and proactivity of our small business community has been shown time and time again as it has overcome even the most robust challenges. The tenacity of small businesses remains impressive and inspirational to many, including those who are looking to found new businesses in the current climate.
We continue to see large numbers of aspiring business owners applying to the Start Up Loans programme for their first loan. This January, we also hit a major milestone of having provided our 100,000th loan. This takes the total amount lent to UK businesses to more than £941 million since 2012. Of the total, 40 per cent have been to women, 21 per cent to Black, Asian and Other ethnic minority backgrounds (not including white minorities).
My experience of talking to many of our loan recipients, who are as varied in their offerings as the parts of the UK in which they originate, is that they feel more confident and reassured in their own navigation of challenges when they hear from those in a similar situation.
Our 100,000th loan recipient was James Fraser, who founded Ramen Electra, based in St Albans in December last year. He took out a £6,000 loan to cover the start up costs of kitchen equipment, and marketing materials to get his business up and running. Who better to explain the attitude of budding entrepreneurs who see opportunity for growth and success in the UK as it works to pull out of recession?
James’ advice to people thinking of starting a business this year is “Just start. My mantra is that a good plan today is better than a perfect plan tomorrow. It is going to be challenging and you will make mistakes but have the confidence to just take the leap”.
James is right. When a business opportunity is identified, it is important to act on it. It is the very reason that access to loans and other finance for small businesses is paramount during periods of economic instability. Without this, they’re less able to invest in the opportunities that are available. In turn this denies their valuable contribution to economic recovery and growth.
A recent report by The Federation of Small Businesses, Credit Where Credit’s Due, says that fewer than half of small business applications for finance were successful in the third quarter of 2022 and nearly a third of them were offered an interest rate of 10 per cent or more. This highlights the importance and attractiveness of the Government-backed Start Up Loans, which provides fixed rates of six per cent on all loans regardless of wider changes in base rates.
Without this variety of available schemes, it’s quite possible that aspiring business owners will find the cost of borrowing to be unaffordable. The consequence of this is of course that our national tapestry of small businesses will be less colourful and vibrant, something that would be a huge loss culturally and have long term knock on effects to the economy.
With that in mind, banks, lenders and other finance providers need to consider ways that they can support small businesses or aspiring business owners this year, while they are under pressure to keep interest rates high. In doing so we can collectively champion and enable more entrepreneurs and facilitate an accelerated recovery of the UK’s economy as a whole.