Member Article

Study supports call for British business bank

Research from the University of Surrey has supported calls for a British business bank, as SMEs report banks as low on the list of finance sources.

The survey of 1000 national business leaders, including interviews and 13 focus groups, was commissioned by accountancy firm Kingston Smith LLP, and found that most SMEs borrow from family or friends, or re-invest retained profits. 58% of SMEs used just one source of finance to start their business, and 42% rely on only one source of finance to sustain themselves.

Professor David Gray, the study director, said: “Our research shows that banks come a poor third in terms of finance sources – which is disappointing given that the UK is considered to be a market economy. SMEs need ‘patient’ capital, finance that is there for the longer term. This is the only way to stimulate and sustain high-growth businesses.”

Sir Michael Snyder, Senior Partner of Kingston Smith, who commissioned the research, comments: “This research validates our experience, which shows that what SMEs really need is long-term funding to close the equity gap. We hope the Government will take this opportunity to throw high-growth potential SMEs the lifeline they need by providing them with a guaranteed level of core working capital finance with which to develop and flourish. This would also reduce the risk profile of lending to SMEs which would, in turn, incentivise banks to lend and unlock new sources of SME financing.“These findings highlight the importance to SMEs of matching different types of expenditure with the appropriate sources of finance, and demonstrate how vital it is to success that businesses are able to diversify their sources of funding. Pairing the right sort of funds to each asset and expense is essential to proper cash flow management – while it also spreads risk, so that businesses are not forced to put all their eggs in one basket.”

This was posted in Bdaily's Members' News section by Tom Keighley .