Reluctant borrowers? Examining the demand and supply of finance for high growth SMEs in the UK
High growth small and medium-sized entities (SMEs) are an important contributor to the economy and job creator in the UK. But is the demand and supply of finance to this section of the economy impeding growth? And if so, what can be done to improve access to finance and growth. Should funding initiatives be specifically targeted at high growth SMEs?
This report addresses these important questions by analysing the borrowing requirements of SMEs (high growth and non-high growth) and the factors that may deter or discourage such firms from borrowing. The research is based on a survey and interviews with high growth and non-high growth SMEs and interviews with banks, alternative financial providers and UK policy makers.
The research finds that there is strong demand from SMEs for external finance but that there is also a high number of discouraged borrowers with trust of banks a continuing issue. The impact on growth of being either reluctant or unable to borrow is significant – with 63% expressing the view that the absence of funding would lead to either more modest levels of growth, a clear reduction in growth or closure of the business.
The report concludes with policy recommendations, suggesting that focusing purely on supply side measures will not be sufficient to address ongoing external funding issues for SMEs.