How SMEs Can Overcome the Barriers to Accessing Business Finance

How SMEs Can Overcome the Barriers to Accessing Business Finance

The UK economy is predicted to shrink this year, amidst a relatively shallow but prolonged economic downturn, according to KPMG’s latest UK Economic Outlook.

The impact of soaring energy prices, the ongoing war in Ukraine, Brexit and the inflationary effects of industries opening after Covid lockdowns have exacerbated inflation and interest rates. All of which have had significant consequences for lending conditions and SMEs seeking support.

SMEs are the backbone of the UK economy

Small and medium-sized enterprises (SMEs) are widely perceived to be the backbone of the UK economy, accounting for three-fifths of employment and around half of turnover in the UK private sector.

Despite this importance, SMEs can struggle to access the finance they need to maintain and grow their business, with Codat citing that nearly half of SME owners are currently finding it difficult to access finance.

Amongst the current pressures, Millbrook Business Finance is seeing companies grapple with their cash flow, including rising costs of fuel, energy and raw materials being common causes for concern. In addition to staff recruitment and retention, global supply chain issues and high taxes further compound these challenges.

Accessing finance can be difficult for SMEs due to several factors, such as limited credit history, lack of assets, limited resources and negotiating complex lending criteria. This is especially true during a recession when credit conditions are often tighter and fewer lenders have the appetite to lend.

Key ways to overcome barriers to business finance access

Fortunately, for SMEs seeking business finance, there are several ways to overcome the barriers to approval and access the financial resources they need. Let’s explore.


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1. Get your paperwork well-organised

One of the most important steps for an SME to take is to ensure that their business documentation is both comprehensive and robust. This might sound daunting, but with a bit of preparation, you can accelerate your access to funding significantly.

When applying for financing, business owners should be prepared to provide a variety of documents from different sources. These documents may include financial statements such as year-end accounts, management accounts, business bank statements, asset registers, debt schedules and so on.

Additionally, it's important to have a detailed summary of how you plan to use the money and how you will pay it back. Collecting all the necessary paperwork ahead of time will help ensure your application is approved first time and processed quickly.

2. Thinking outside the box

Traditionally, when considering finance options to fund business investments, many SMEs would approach their bank by default. However, while the wider finance industry has evolved considerably, high-street banking remains somewhat antiquated and inaccessible when it comes to bespoke support.

Often, mainstream routes to obtaining credit remain limited, making it more likely that businesses will be unsuccessful in their applications. This can often be because assessments are based on automated, surface-level information, rather than deeper consideration of the individual business case.

This is where specialist business finance can be an invaluable resource when access to traditional sources of financing is restricted due to market uncertainty.

While these financing options can sometimes require higher interest rates than traditional bank business loans, they provide more flexibility in terms of repayment schedules, increased speed of funds being released, and the consideration of adverse credit and additional income that could greatly benefit the business. 

3. Working with a business finance specialist

Business finance experts, such as those at Millbrook Business Finance, can help SMEs manage cash flow and reduce overhead costs to maintain profitability during tough economic times by finding the best-fit financial solution.

Specialists understand that business owners are busy people, so they will scan the market, meticulously prepare applications and raise the unique merits of a business case with the UK’s best business lenders making approval quicker and more likely.

Such expertise is invaluable during turbulent economic times when cashflow issues are likely already putting strain on an SME’s operations. 

4. Leveraging your existing assets

Asset finance is an often underused but effective solution that can present solutions at a lower entry point.

Accessing the right finance options can often seem like an obstacle for SME owners, and many may not be aware that the assets they own can be leveraged to secure finance.

Business finance specialists can help to identify opportunities to raise capital too – with equipment and machinery to telephone systems all being considered an asset. Businesses can then benefit from the loan being secured against the asset. Ultimately, representing a cheaper form of lending.

Asset refinancing can also help SMEs obtain the funding they need. Refinancing allows businesses to replace existing loans with more favourable terms that usually include lower interest rates or longer repayment periods.

This type of financing can provide immediate relief for businesses as it helps reduce costs, which in turn allows businesses more flexibility in managing their cash flow.  

An opportunity to thrive

Ultimately, for SMEs to successfully navigate challenging economic conditions will require careful planning, coupled with creativity in sourcing accessible financing solutions for success during any potential recessionary period.

By taking proactive measures such as developing comprehensive business plans, tapping into alternate lending sources, and engaging experienced financial professionals, SMEs can position themselves to not only get funding for their business but to strategically weather the downturn effectively and turn it into an opportunity for business growth and wealth creation.

For further information, get in touch with Millbrook's helpful lending experts or check your eligibility for our business finance solutions. 

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