Half of UK SME’s have had an application for a loan rejected in the past year with one in ten owners remortgaging their homes to keep trading, new research suggests.
A survey of UK business owners and managers found a 14 per cent increase in those saying they had been rejected for government loans since last year and a 4 per cent rise in those rejected for bank loans.
Four in ten small businesses said they were unable to invest in their firms because of a lack of financing options, up from just over one in ten in April last year.
The polling conducted in July on behalf of eBay UK found that about three in ten small business owners and managers were turning towards their personal savings or credit cards or taking out personal loans. One in ten said they had remortgaged their house to access much-needed cash.
According to the Federation of Small Businesses index, 87 per cent of businesses were reporting higher operating costs this year compared with last in the first quarter. Unpredictable cashflow was also flagged as a big challenge, with 61 per cent of small businesses reporting late payment of invoices.
Murray Lambell, eBay UK’s general manager, said: “The current environment of inflation, cashflow issues and low consumer confidence makes it extremely difficult for small businesses to thrive. At eBay, we only succeed when the startups on our platform succeed and the same goes for the UK economy.”
The rising cost of living is exacerbating problems with late payment of commercial debts placing added strain on companies’ cashflow, according to separate research.
Inflation appears to be causing corporate customers to hold on to cash for longer, according to Monzo, the digital bank, leaving suppliers facing a longer wait for bills to be settled.
Nine in ten Monzo business customers said they had experienced late payments and two in five said the issue was getting worse because of rising prices.
Jordan Shwide, head of Monzo business banking, said: “Getting paid late can have a detrimental impact on [business owners’] finances, mental health and the future of their livelihoods. It’s getting tougher for small businesses as the cost of living increases.”
While the government says late payment is a longstanding issue in the UK economy, its plan to implement sanctions to discourage late payment appears to have stalled while a policy that forces large companies to reveal their payment performance has been called “wholly misguided and ineffective” by the Association of Accounting Technicians, a professional body
Almost half of small business owners have called on the government to use an expected emergency budget to introduce energy grants, according to a survey by the small business lender iwoca.
Business owners are also asking for tax cuts including reversals of both the proposed increase in the corporation tax rate for businesses and the rise in national insurance to ease the squeeze.
Half of UK SMEs have had loan application rejected in past year