Most SMEs don’t wish to borrow from a bank
The debate over the funding of UK SMEs and their supposed importance in the economic recovery has been fuelled today by a new report from Demos.
According to the think-tank, repeated efforts by policymakers to stimulate SME lending have failed and as a result, so the argument goes, economic growth is being held back.
However, research from Demos claims that most SMEs don’t wish to borrow from a bank and of those that do, 90% have no problems getting the funding they need.
At the same time, the analysis shows that the majority are SMEs are not significant contributors to economic growth, despite the crucial role they play as existing employers, customers and suppliers.
The report argues for two fundamentally changed assumptions.
First, rather than thinking small, we should think growth, focusing our efforts on those businesses with the will and potential to deliver growth regardless of size.
Second, to target the parts of the economy where growth is achievable, we may need to look beyond bank lending and devise a funding environment able to support the risks associated with innovation and start-ups.
Such an approach would help ensure that businesses with the capacity to grow receive the financing they need, paving the way for economic recovery, says Demos.