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Demand for finance in the South West is strong across all stages of development for Small and Medium-Sized businesses, but there is a perceived gap in the supply of finance in the region.
27 June 2023
Demand for finance in the South West is strong across all stages of development for Small and Medium-Sized businesses (SMEs), but there is a perceived gap in the supply of early stage equity, growth stage equity and debt finance in the region.
Those were the key findings of a recently published survey undertaken for the British Business bank, in partnership with Ipsos, that sought the views of intermediaries in South West England between October and December 2022.
Intermediaries taking part in the research included accountants, lawyers, business support specialists and brokers.
Just over half of SMEs in the South West expect to grow over the next 12 months, with 15% expecting to become smaller or close, or sell the business in the next 12 months.
Two thirds of those surveyed said demand for finance exceeded supply, in line with the UK overall
The sentiment expressed by intermediaries was that there will be increased demand for recovery finance. Existing finance may become too expensive as interest rates continue to rise, so there is a need to refinance, but it is felt that no one wants to help businesses with refinancing.
Intermediaries surveyed said expansion was the most important driver for SMEs to want to take on additional finance.
But they were pessimistic about SMEs’ financial health, with three quarters of intermediaries saying that SMEs were not well equipped to reduce their debt burden. The economy, energy costs and lack of skills are key barriers to achieving growth.
Intermediaries in the South West reported a lack of awareness of options available as the biggest barrier to demand for finance
Most intermediaries said SMEs were not well informed about options for equity and alternative finance and there were gaps in finance supply for SMEs, regardless of development stage.
There was an increase in demand from start ups when Covid hit in 2020. Before Covid it was 40% start ups, but when Covid began it flipped - it was 60% start ups. This was because people had time on their hands and wanted to start their own businesses. More recently it has begun to return to pre-Covid levels.
Production levels within SMEs in the South West were most likely impacted by gaps in finance supply, but those surveyed were more optimistic about alternative finance over the next 12 to 18 months.
Most said SMEs should borrow from alternative sources if they cannot use traditional routes.
Half of intermediaries thought business viability most influenced SMEs’ success in obtaining finance.
Around half of intermediaries said access to financial support to start a business was inadequate.
Those surveyed considered professional advisors as the most important information source for SMEs
Check out our Top 3 Myth-Busting Facts on Refinancing for Businesses.
If you would like to discuss finance for your business, please get in touch with a member of our Funding Advisory team for an informal conversation.
