Image: Marcin Wichary/Flickr
Image: Marcin Wichary/Flickr

New research has highlighted the failure of many lenders to cater to the individual circumstances of small and medium-sized enterprises (SMEs), as only a fifth say banks’ advice always meets their needs.

In a survey of over 1,000 SMEs owners about the changing needs throughout their growth stages, Close Brothers revealed that the individual requirements of SMEs are not being met effectively.

Nearly half (46%) of SMEs have experienced barriers in accessing finance, with a further quarter (24%) being turned down completely when they are looking to grow, according to the study.

Of the SMEs who experienced barriers in accessing finance, over a fifth (22%) stated that lenders didn’t understand their specific needs, with a further quarter (25%) saying that their lender did not understand their sector at all.

Adrian Sainsbury, chief executive officer, Close Brothers commercial division said: “Smaller businesses do not have the same access to and experience of the myriad of options that are available to them as larger companies. It’s clear that the traditional sources of advice for many are no longer sufficient.

“Many do not feel their banks are taking into account their sector and specific circumstances, meaning they are not receiving the level of support they need to secure the right products and funding for the future.”

The report also found that generalist lenders, who account for 90% of lending to SMEs, often cannot meet these varied requirements of SMEs for funding at differing stages of their growth. This poses a significant challenge for the SME sector, especially as a large number of SMEs (38%) only turn to high street banks for information and advice about the most suitable types of finance for their business.

In addition to the lack of guidance received by SMEs as they grow, there is a clear issue with long-term business planning, with only 28% of SMEs planning their needs for finance more than a year in advance, while 64% only plan up to a year in advance. Additionally, only 8% of SMEs do not engage in planning at all.

SMEs currently account for 99.9% of all private sector businesses and play a vital role in the UK’s economy.

Mr. Sainsbury added: “Given the importance of SMEs to the economy, it is vital that these companies are properly understood by the mainstream funders they turn to for guidance, whether knowing the specific financial needs of that business in a particular sector, or identifying the type of lending that will best suit their

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