By Daniel Hunter
A lack of start-up finance is the biggest reason for new business failure as the bank lending slump continues, according to a survey of accountants by Bloomsbury Professional, a leading tax and accounting information business.
71% of accountants — who often see first-hand what goes wrong in businesses — surveyed by Bloomsbury Professional, said that insufficient finances to fund start-up costs was one of the key reasons for new business failure.
Bloomsbury Professional says that despite Government initiatives to boost lending and investment for small businesses, such as the Enterprise Finance Guarantee Scheme and StartUp Loans, many new businesses still cannot access the finance they need.
Martin Casimir, Managing Director of Bloomsbury Professional, says: “Financing has always been a huge barrier for start-ups, but since the financial crisis, has become almost impossible to find.”
“The continued difficulty in obtaining new business bank lending is holding new businesses and the UK economy back. The small businesses that could drive the UK out of recession can’t even get out of the blocks.”
Bloomsbury Professional says the bank lending problem is exacerbated by a lack of thorough planning by new businesses.
60% of accountants identified poor market research by start-ups as another key reason for failure. The next most identified reason was ‘costly overheads’ (57%).
Martin Casimir says: “Start-ups need to do their research. They need to have a clear idea of how they will fund themselves, how they will manage their costs, and the layout of the market in which they’re about to compete.”
“Planning ahead and doing the right kind of research could make the difference for new businesses looking to find crucial start-up finance.”
“Banks are reluctant to lend, but they will be even more reluctant to lend to just an idea. Start-ups need to give banks plenty of information about their business when applying for finance, but many just aren’t ready to provide the kind of information that banks need.”
Martin Casimir adds: “To plan effectively and to find the right financing, start-ups need to use the advice that’s on offer to them. They need to take advantage of their networks to find out about the marketplace, and they can use the networks of others too.”
Bloomsbury Professional adds that the accountancy profession has a key role to play in helping new businesses find funding.
Martin Casimir explains: “Accountants are increasingly advising start-ups. Having been through the funding process before with other clients, they know what information banks need before they can invest. Business plans, cost projections, and market research all come into this.”
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