An individual’s own money - sometimes from savings or more expensively from personal loans or credit cards - also is a major source. What might seem more surprising is that research shows over 80 % of businesses starting up do not borrow money at all and 50% of existing businesses have no desire to borrow or seek investment.
It is businesses seeking to grow that are the most in need of access to appropriate finance and support. In recent years, while the banks have been seeking to reduce their exposure in the small business market, especially in the start up and early stage sectors, there has been a substantial growth in alternative finance providers. Yet most of these lenders also rely on historic trading performance backed by accounts when making a decision - which rules out many of the same businesses. If there is any history of past credit issues the computer will jump in and say “no”.
The good news is that there are lenders, including my own ART Business Loans and others in the responsible finance sector, that are designed to provide all applicants with an equal opportunity to access finance, regardless of past credit or trading history. For us viability is the key - and our desire for the borrower to achieve other economic outcomes, usually relating to the creation and preservation of jobs.
The small business sector continues to be extolled as the true engine of economic growth and it is not surprising that past support for this agenda has been provided by the public sector. However, with spending cuts at national government level appearing to leave very little funding available for small businesses, it is being left to local sources to come to the table. Regrettably, we have seen little evidence to date that this is likely to happen speedily, if at all, in an appropriate manner or amount. Let’s hope we see some soon…