By Daniel Hunter

Small and medium-sized enterprise (SMEs) are shunning High Street banks in favour of cash and alternative forms of finance, according to new research.

Only 13% of SMEs in the UK relied on the standard High Street bank to finance their business in the last 12 months, according to Hitachi Capital’s quarterly British Business Barometer.

With the need to protect businesses from bad debt, ensure a positive cash flow and retain the ability to operate, the research found that SME’s are looking to alternative forms of finance, with almost one in four businesses (23%) moving to Asset Finance, operating or finance lease.

More than half (54%) continue to inject their own cash into the business.

But Hitachi said that it’s not just the new era of small businesses that are open to different forms of funding - asset finance has been the main source of finance over the last 12 months for businesses with a turnover between £1m and £10m (44%), and while start-ups rely predominantly on their own cash in the first year of trading (86%), companies with a turnover of £10m+ are spreading their finances with 40% relying on cash, 33% on Asset Finance, 32% on a standard business loan and 30% finance their business via an overdraft.

Gavin Wraith-Carter, General Manager at Hitachi Capital Business Finance said: “It’s encouraging to see that SMEs are showing a greater confidence in the UK economy and finding the impetus they need to drive growth for their business. Key to supporting this drive is providing the funding they require to achieve their ambitions. For too many years, small businesses have been hindered by the restrictive terms imposed by UK banks and, as the research suggests, alternative forms of finance are becoming a vital life line to achieve continued expansion.”