Raising Finance

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Technology SMEs set to grow this year through government funding

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Traditional funding methods remain the most popular avenue among SMEs, with 41 per cent of business owners applying to banks and 42 per cent applying to a finance institution, such as the First Enterprise Business Agency or regional community finance institutions, according to the survey from online bookkeeping service Crunch.u2028

Crowdfunding was the solution for 16 per cent of businesses, while 26 per cent turned to private investment, including angel investors and venture capital investment.

Less popular funding routes included private investment from family and friends (13 per cent) and government grants and support schemes (nine per cent).

But while the results show business optimism is high, financial institutions are still far from relaxed about lending. 

Of the SMEs that applied for funding in the last 12 months, 25 per cent of applications were rejected by banks and 34 per cent were rejected by financial institutions.

Private investors, including venture capitalists turned away more than quarter of all applications (26 per cent), family and friends rejected ten per cent, while 11 per cent of businesses were unsuccessful when applying for government grants and schemes. 

Darren Fell, MD of Crunch Accounting, said: “This research proves what many SMEs have long understood – the business climate is changing and the tech industry in particular is looking to grow. However, without the proper lending support from banks and financial institutions, it’s almost impossible for small companies to meet their true potential. The success and extension of the Startup Loans scheme shows that many entrepreneurs out there are looking for funding.”

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There are over 47,000 digital technology companies in the UK, a report this week found, with nearly three quarters (74 per cent) located outside the capital. Around half have been launched since the 2008 credit crunch while 15 per cent of all companies set up since that time are in the digital technology sector.

The Crunch survey findings come at the same time as a call by the Organisation for Economic Cooperation and Development (OECD) for the UK to loosen its immigration controls to allow workers with key talents, especially technology related to enter the country.

“The target should be scrapped, and businesses should work with the government to provide better vocational education and in-work training, which will help to drive up living standards by increasing productivity,” John Cridland director general of the CBI told the Financial Times recently.

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