Nearly seven out of ten have been rejected when looking for funding
Many cite a lack of support during the pandemic
Large swathes require funding for growth
Yorkshire-based SMEs have an urgent need for cash, but are being turned away from many ‘traditional’ lenders, leading to the risk of a major funding gap as they strive for growth post pandemic.
New data from Allica Bank shows that 46% of Yorkshire-based SMEs will require additional funding within the next 12 months, but that nearly seven out of ten (69%) say they have previously been rejected when applying for extra cash. The deficit in funding will potentially hamper recovery and growth in the region, only to be compounded by the end of the UK’s furlough scheme.
In response to the findings, Allica believes new approaches to how banks assess businesses for finance and wider business funding schemes need to be urgently adopted to protect the 6 million UK SMEs1 post pandemic.
Explaining how current processes need to be challenged, Katie Roberts, from Allica Bank’s Yorkshire relationship management division, says:
“There will have been unviable businesses rejected for funding, however the high percentage suggests business performance and credit ratings are not being taken in the context of the pandemic. Instead, banks need to start taking a more forward-looking approach, using other data and information to assess the creditworthiness of a business.”
The survey results also demonstrated that more than a quarter (27%) of businesses felt that they did not have access to adequate support from their bank during the pandemic and that only 35% feel completely confident in obtaining funding from their existing lender.
“Covid loans have undoubtedly been a lifeline for many businesses, but they have also dominated the resources of many banks, who have then lacked the capacity to support financing business growth and the many Yorkshire businesses that have been able to adapt and perform well during the pandemic,”
she says.
“Expert support from a dedicated relationship manager is required to support the 46% of SMEs knowing they will need financing over the next 12 months and the further 28% that are not sure. What our region’s businesses need is someone who truly understands the businesses the bank is lending to, and this is going to be more important than ever in the months and years ahead.”
Of those SMEs looking for funding, most Yorkshire businesses (26%) are looking to invest in new equipment, 24% to buy or upgrade premises, and 20% to recruit new people. SMEs are also looking to invest in marketing and sales (13%) and to support cashflow challenges (23%).
“On the whole, the results paint a positive picture for the region,”
concludes Katie.
“The majority of funding is being sought for growth and expansion, rather than recovery. A requirement that needs support if Yorkshire is to bounce back as it should.”
The survey was conducted by Allica Bank and the specialist small business magazine and media platform SME Today.