Study finds lack of finance is forcing 40% of SMES to halt, pause operations


A study by Manx Financial Group has found two in five SMEs have had to pause or stop aspects of their business due to a lack of financial resources. 

This 40% amount is a substantial increase from the previous year’s figure of 27%. The findings shed light on the pressing need for innovative measures to address the funding shortfall and support SMEs, which play a vital role in the UK economy.

The research conducted by Manx Financial Group reveals the most popular external finance options among SMEs. Unsecured and short-term business loans emerged as the preferred choices, followed by secured loans and cash advances. However, the study also reveals a concerning trend, with 15% of SMEs unable to access the external finance they require.

SMEs face several barriers when attempting to source external finance or capital. The survey identifies the main obstacles as high costs (39%), lengthy processes (36%), and inflexible repayment terms (34%). Additionally, SMEs express concerns about lenders lacking an understanding of their business (25%) and providing subpar customer care (8%).

The lack of financing has forced SMEs to pause or halt various crucial activities. These include marketing initiatives, expansion into new markets, recruitment of qualified personnel, opening new offices or sites, and research and development (R&D) projects. Such limitations hinder the growth potential and competitiveness of SMEs in the market.

Looking ahead, SMEs anticipate growth in sales, expansion into new markets, and recruitment over the next 12 months. However, there is a notable decline in optimism, with 27% of SMEs expressing concerns that their business will not grow at all during this period. Nevertheless, the survey reveals that with appropriate external finance, most SMEs believe they could achieve a growth rate of up to 19%.

Douglas Grant, CEO of Manx Financial Group PLC, expressed his concerns about the persisting challenges faced by SMEs in obtaining finance. Grant emphasized that the limited accessibility to finance has significant consequences for both SMEs and the UK economy, particularly during uncertain times when funding is crucial for growth. SMEs account for approximately half of all private sector turnover in the UK, underscoring the urgent need for innovative measures and a permanent government-backed loan scheme to support their future and sustain economic recovery.

The study’s findings shed light on the critical role of financial support for SMEs and the potential impact on the overall economy. It underscores the necessity for collaboration between traditional and non-traditional lenders to ensure the survival and success of numerous companies. Addressing the funding shortfall and providing access to finance for small and medium sized businesses will not only foster economic growth but also secure the backbone of the UK economy.

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