Managing Your Cash Flow

Bank funding remains top choice for SMEs

1 min read

01 August 2012

Entrepreneurs are choosing bank funding over other forms of finance. Is this a realistic approach?

Less than a quarter of entrepreneurs expect to turn to venture capital and private equity firms for funding over the next year, research by Investec shows.

Although lending conditions remain very difficult, some 57 per cent of surveyed businesses say they expect to seek a bank loan or overdraft to fund their business. 

Every six months, Investec speaks to the country’s top entrepreneurs to gauge their confidence in the economy. Results for the latest Investec Entrepreneur Confidence Index reveal that while business leaders expect the general economic climate to deteriorate, they are optimistic about the future of their companies.

They remain, however, quite pessimistic about access to funding. The Index found that just 6 per cent of UK entrepreneurs expect external funding to be easy to obtain, indicating the tough conditions in the market.

More than two-thirds of businesses expect it to be difficult to obtain finance, while 22 per cent of respondents say it will be “very hard” to access additional capital.

It is hoped, presumably, that the government’s new Funding for Lending scheme, which goes live today, will help to make bank funding more readily available than before.

Of the various sources of finance, venture capital and private equity were the fourth most popular option, behind using retained earnings, bank loans and asset-based lending. There are also some 6 per cent of businesses which expect to access funds by selling part of their business operations.

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