Study reveals funding shortage forces UK SMEs to halt operations

In a recent study by Manx Financial Group, and reported by Business Matters, it was revealed that a significant number of small and medium-sized enterprises (SMEs) in the UK have been forced to halt or scale back their operations due to a shortage of funds. The study explained the challenges faced by SMEs and emphasised the need for immediate action to support these businesses.

According to Manx Financial Group's research, unsecured and short-term business loans were the most popular external finance choices for small and medium-sized enterprises (SMEs), which they relied on, followed by secured and cash advance loans. According to the report, approximately one in every seven SMEs that required external finance and/or capital were unable to obtain it.

The most significant impediments that SMEs encountered in obtaining external finance/and or capital were that it was too expensive. The report mentioned that 36 per cent of respondents said the process took too long and there was a lack of flexibility in repayment terms. Other impediments highlighted by SMEs included the lender's lack of understanding of their business and bad customer service.

Due to the funding shortage, SMEs have been forced to suspend or stop various crucial activities like marketing, expanding into new markets, recruiting the proper employees, creating news offices or sites, and R&D.

SMEs anticipate sales, new market expansion, and recruitment will experience the biggest increase in the next 12 months, despite a drop from last year. However, more than a quarter of SMEs are concerned that their business will not grow at all in the next 12 months. However, most SMEs feel that with suitable external financing, they might grow their business by up to 19 per cent.

Douglas Grant, CEO of Manx Financial Group PLC, while commenting on the findings, said it's unfortunate their research uncovers a persistent issue that many SMEs have long been witnessing. He added that SMEs continue to face difficulties in obtaining finance.

Expressing his concerns, Grant noted that this limited accessibility will have a negative impact on both SMEs and the UK economy in terms of growth, particularly during uncertain times when it is most required. The amount of economic growth lost is significant, given that SMEs account for around half of all private sector turnover in the UK. Grant stressed the need for innovative measures to tackle the financial gaps and also the government's intervention in mitigating the impacts on SMEs.

According to Grant, many businesses are struggling with their own cost of living crisis as borrowing costs rise. While many SMEs were proactive in locking their debt into fixed-rate structures, he noted that it is now too late for other enterprises that have borne the burden of escalating costs in the absence of a financial safety net.

To secure the future of our SMEs, Grant stressed the importance of implementing a permanent government backed-loan scheme that is sector-focused and involves both traditional and non-traditional lenders. As fears about the economy's future grow, the CEO of Manx Finance Group PLC emphasised that the importance of implementing a permanent plan cannot be understated. According to him, it might be a vital component in sustaining economic recovery and, as a result, determine the survival of several firms.

Asides from the government offering loans to small businesses, other companies, organisations, and even local authorities also play a role in providing financial assistance to SMEs. An example is one of the top banks in the world, HSBC, which has recently unveiled a program to help UK (SMEs) reach new heights.

The bank wants to improve market access and support the expansion of current businesses with a whopping £15 billion lending capital. The SME Fund, a vital component of HSBC UK's commitment to supporting British businesses, is set to turbocharge expansion efforts both domestically and abroad.