Research proves borrowing is vital in driving growth of SMEs

24 April 2017

Accessible funding for SMEs essential for dealing with Brexit challenges

UK SMEs that can access borrowing grow significantly faster than those that don’t, shows research from Funding Options, the online business finance supermarket.

Funding Options says the research revealed that SMEs with higher levels of borrowing (50%+ gearing*) grew their turnover on average by 57%** over the last five years, compared with just 6% for those who did not borrow at all over the same time period (see results below).


SMEs with higher levels of borrowing (50%+ gearing) saw the fastest growth in turnover - growth in average turnover 2011/12-2015/16

Graph: SMEs with higher levels of borrowing (50%+ gearing) saw the fastest growth in turnover - growth in average turnover 2011/12-2015/16


Funding Options ( says that this shows the importance of having competitively priced finance widely available to SMEs and the ongoing damage to the economy caused by High Street banks cutting their lending to the sector.

Conrad Ford, CEO of Funding Options, says:

“If SMEs cannot get quick access to funding to pursue those business opportunities they come across, then UK growth will be far slower and job creation lower.”

Reduced bank lending since financial crisis has put SMEs under pressure

The lack of bank funding to SMEs is only partly explained by the self-inflicted wounds of major banks, such as losses on derivatives or having to pay huge regulatory fines and redress, such as under PPI.

In addition to these problems, Basel III regulations, introduced in 2013, have raised the capital requirements for banks which has made it more expensive to lend.

The Government has helped businesses obtain funding through setting up the Bank Referral Scheme. Under this scheme, if a bank rejects a loan application from a small business, it will offer them a referral to one of three designated finance platforms, of which Funding Options is one, to help them find a suitable alternative source of funding.

Conrad Ford adds:

“Debt is the lifeblood of the real economy.”
“Having fought through the recession and survived the initial Brexit shock, many businesses are now looking to push on. However, their growth is still being hampered by a lack of appetite for small business lending amongst High Street banks.”
“It is essential business owners and finance directors are aware of the extensive range of alternative funding options available to them, which can be tailored to fit their size, sector and where they are in their life cycle.”
“Specialised finance providers also tend to have more expertise in working with small and medium sized businesses. This closer relationship means they better understand the needs of the business and can offer bespoke products.”

* Gearing is defined as the level of a company’s debt as a percentage of its assets.

** Based on an analysis of company results of 51,538 small and medium sized private non-financial businesses in the UK, 2011/12 – 2015/16.