Financial pressures can be an enormous concern for SMEs at any time, and it’s particularly difficult in the current economic climate following the pandemic and during the ongoing cost-of-living crisis.
It can be confusing and bewildering for business owners to get the right advice on how to raise funds for a business. Turning to an expert can be the most sensible solution, and this is where finance brokers can play a key role in supporting SMEs.
Brokers can be a great source of knowledge when it comes to finding the best finance solution for a small business as they have access to tailored products with bespoke rates, rather than just off-the-shelf loans. However, our research* shows that only a third of SMEs have used a broker to advise them in making the right decision.
The research* also reveals that nearly half (49%) of SME decision-makers rely on personal loans to fund to their business, making it the primary source of funding for businesses of this size. Indeed, over a third of SMEs (35%) have never pursued a finance product tailor-made for businesses.
If this sounds familiar, it might be wise to rethink your options. Business funding through personal borrowing and credit is both a risky and expensive route to take. Personal borrowing rates are frequently higher than the cost of borrowing available to good businesses on commercial terms. It can put considerable pressure on SME owners because the personal and the commercial become wrapped up together and the boundaries become blurred.
A good broker will be able to advise on all of the funding options available, including business savings. Our research found that SMEs who access funding through a broker are more likely to use a diverse range of options, which include commercial mortgages (54%), start-up loans (52%) and asset finance (49%). Over a quarter of SMEs (28%) who had used a broker stated their business was able to consider multiple finance options when applying for funding. Two thirds (67%) of decision makers surveyed said that they had recommended or would recommend their broker to others.
Over a third of SMEs (35%) say they have been rejected for funding in the past. Choosing to use a broker could avoid this, as they are more likely to give you a higher chance of success because they know the market and which lenders are better suited to you and your business circumstances.
On average, SMEs using a finance broker have secured over £95,000 in funding towards their business in the last 12 months – generating over £100,000 of business as a result.
Now more than ever, small business help and guidance can steer SMEs towards the right options that can help their business survive and grow. Personal lines of credit can quickly become exhausted and are a poor substitute for tailored business products.
SMEs should seek all available advice – from brokers and other advisors such as their accountant and lawyers.
Above all, don’t suffer alone if you need business support. Speak to experts and take advice. A good broker can help you find the way forward and gain the liquidity that you need.
Source: Opinium Research, conducted between 10 and 20 October 2019 with a nationally representative sample of 1,051 senior decision makers in UK SMEs
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