UK businesses stunted by dip in applications for funding

● Majority of firms too cautious to apply for finance ● More flexible funding options needed, says study

Credit “apathy” is restricting potential growth opportunities for UK businesses, says new research released today.

More than half of British companies (56 per cent) did not attempt to apply for finance in the past year, according to a study from the British Chambers of Commerce (BCC) and Wesleyan Bank.

This number increased significantly among smaller firms, with 63 per cent saying they did not seek finance.

Limited investment intentions and weakened cash flow were cited as key contributors to the lack of demand for finance.

Companies that did apply for funding showed preference for conventional sources such as overdrafts (18 per cent) and business loans (16 per cent), with less than 4 per cent seeking crowdfunding, peer-to-peer or angel finance options.

The results demonstrate the importance of boosting business investment by addressing upfront costs and taxes which impede growth, said the BCC.

It also stressed the need to increase competition in banking, raise awareness of alternative finance options, and ensure the British Business Bank has sufficient funding to support promising firms on their growth journey.

Suren Thiru, head of economics at the BCC, said: “Accessing finance remains crucial to the lifeblood of a business, yet a decade on from the financial crisis these results suggest that we have moved from a credit crunch to credit apathy where a lack of demand, rather than supply of finance is now the overriding issue.

“While businesses continue to report a reluctance to borrow in the current economic climate, discouraged demand remains a real phenomenon with businesses reluctant to approach banks to try and get finance because of the assumption that they will either be rejected or that they will have other facilities re-evaluated.”

According to Thiru, the government should take more responsibility to help kick start business investment.

He said: “Firms need relief from the heavy burden of upfront costs which sap funds that could otherwise be spent on big capital expansions.

“Give companies the financial room to grow and clarity on Brexit and we’d see more long-term investment coming through.”

Paul Slapa, head of direct sales at Wesleyan Bank, said: “Understandably, some businesses are cautious about seeking finance given the fluctuating appetite of high-street lenders to support them.

“However, in reality there are now more alternative funding sources available from specialist providers than ever before to assist firms to grow so it’s worth exploring all potential options to make an informed decision.”