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Small firms looking beyond banks for funding

by: IFAonline
  • 01/11/2010
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Small firms looking beyond banks for funding
SMEs are increasingly turning to alternative sources of funding, although bank overdrafts remain a popular form of finance.

A third of SMEs applied for bank overdrafts over the past year with a success rate of 73%, according to a CBI survey. 

However, of the 380 UK small and medium-sized firms surveyed, 21% also sought funding from owners, directors, families and friends, with a success rate of 94%.

Other sources of finance included credit from suppliers and late payments, while larger firms were found to be more successful in obtaining loans from banks than smaller ones.

The research, carried out in partnership with the Association of Chartered Certified Accountants, also found 54% of firms tightened up their own credit policies towards customers over the past year.

Russel Griggs, chairman of the CBI’s SME Council, said: “Small and medium-sized businesses are the lifeblood of the economy, and will play a crucial role in creating jobs and prosperity during the recovery.

“Although banks remain an important source of finance, there remains a lingering perception that applications will be refused.

“However, this survey shows that three-quarters of all applications for bank loans and overdrafts do succeed. Providing accurate financial information and using proper credit controls will help open up more doors for SME funding.”

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