Many businesses unaware of alternative financing options
By Daniel Hunter
Awareness of different types of business finance is very low among small to medium sized enterprises (SMEs), with most continuing to rely on traditional bank overdrafts or personal sources of cash for additional funding, according to new research by Experian, the global information services company.
A poll by Experian of nearly 300 SMEs, conducted to understand how and why they have sought additional finance, has found that alternative sources of finance are yet to have made a significant impact. Of the various forms of business funding options, crowd-funding was the least well-known among respondents, with 69 per cent never having heard of it. Meanwhile, angel investment, business cash advances and government grants also scored poorly in terms of awareness.
When questioned about the first thing they do when thinking about additional financing, 42 per cent of respondents said that they would approach their personal bank. This was followed by 18 per cent who said they would speak to their accountant. Few of the respondents stated that they would shop around: just one in ten said they would try all the major banks first, seven per cent said they would search the internet for the best deals and just six per cent said they would speak to a broker.
The findings also reveal that 60 per cent of respondents had sought some form of extra funding in the last 12 months and the need to alleviate short-term cash flow problems was by far the biggest reason for applying for extra cash (58 per cent). This outstripped activities for growth, such as expanding their product portfolio (20 per cent) or hiring more staff (12 per cent). When asked to name the primary source of additional funding currently used, the top answer (20 per cent of SMEs... continued on page two >