Same old problems continue to drag on SMEs, claims research

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As the boom in small and medium enterprises continues with five million businesses nationwide, research carried out by AXA Business Insurance, reveals a worrying picture of firms not being able to access conventional means of finance.

Rather inevitably, the research showed that access to finance continues to be the biggest barrier to growth for SMEs. Of the 500 companies interviewed, just 12 per cent said they had accessed funding in the last year, however 44 per cent relied on an overdraft, credit card or family and friends to provide the additional cash they required.

A further 20 per cent had taken out a bank loan. A relative minority had turned to the schemes specifically designed to help them: for example, 10 firms had used the funding for lending scheme, six per cent had used Enterprise Investment Schemes (EIS) or Seed Enterprise Investment Schemes (SEIS) and just seven per cent sought government loans.

Nearly half of the firms said they plan to invest in new equipment or other resources this year and around 60 per cent of these said they needed to look for funding to secure this growth. Yet AXA warns that many SMEs may struggle to do the best for their business as less than 20 per cent have any understanding of schemes such as funding for lending, EIS, SEIS or government loans that could help them.

Even the increasingly popular options of peer-to- peer lending and crowdfunding were only really understood by around 30 per cent and 20 per cent respectively.

Gerry Donnachie, head of underwriting at AXA Business Insurance, says they spoke to 500 people who were interviewed about their business during a telephone call in April 2014. Similar research was carried out at the same point last year by the company. Not surprisingly, the results were the same. So, nothing has changed in 12 months to alter this issue.

“The research that we carried out last year showed very similar results,” he said. “We’re very interested in the SME market and are continually doing this type of research so that we can understand the needs of our customers and what we’re seeing is a similar picture.”

He said stakeholders are interested in SMEs and “ensuring that they can do everything to make them aware of funding initiatives available to them”.

Mr Donnachie describes small and medium enterprises simply as, “the lifeblood of our economy and clearly it’s very important that they are grown and encouraged to succeed”.

The company looks to “provide clear, accessible guidance to SMEs and through their research to support them against any negative influence”.

Mr Donnachie said there would be a greater expectation that more SMEs were accessing money through more formal means – such as bank loans – but this was shown not to be the case. “There have been various schemes set up but this research shows there is not the take-up,” he added.

From the businesses’ point of view, it’s important to ensure that small and medium enterprises continue to thrive.

The insurance company says often businesses are so busy in the process of starting up their own business, that they would not have the time to consider accessing funding to support their work.