UK small businesses are worried about growth, not debt

·2 min read
Around a third of SMEs say they wouldn’t consider approaching their bank if they were worried about business finances. Photo: Getty Images
Around a third of SMEs say they wouldn’t consider approaching their bank if they were worried about business finances. Photo: Getty Images

A very small number of small and medium sized enterprises (SMEs) are concerned about their level of debt, new data revealed, despite a big increase in the amount of borrowing since the start of the pandemic. Their main worry seems to be barriers to future growth.

Only 11% of say they fret about debt, according to research from Lloyds Bank (LLOY.L) Business.

“As the economy has reopened and begins to recover, it is reassuring that a relatively low proportion of small businesses are worried about their ability to make repayments on their debts,” Gareth Oakley, managing director of business banking at Lloyds Bank.

“However, when it comes to future growth prospects, the longer-term impact of repaying those loans should not be underestimated,” he said, adding that “as the country seeks to recover, it is vital that businesses can access to the specialist support and investment they need to grow and prosper.”

The research found that of those who are worried about debt, 54% said that while the repayments are affordable, servicing the debt will prevent the business from investing in itself to grow for the future.

Only 16% said the main issue was the ability to make repayments.

Many businesses see a number of barriers to growth over the next five years: the main one is a lack of profit (29%), followed by high running costs (25%).

About a quarter (24%) are concerned about regulation and legislation impacting their prospects, while 15% have concerns about problems managing cash flow.

Read more: UK manufacturing growth slows as costs rise

Despite these challenges, around a third (35%) of SMEs say they wouldn’t consider approaching their bank if they were worried about business finances.

This was mainly because small businesses wanted to sort any problems out themselves (52%) or they don’t believe their bank would be able to help (24%).

A further 22% would prefer to ask someone else they know for support, while 19% believe the bank’s help would work out to be too expensive.

“It’s a big concern that around a third of small businesses would not consider speaking to their bank when worried about their finances," said Oakley.

 "A lender can provide guidance on business plans, growth goals, reaching new markets, balancing competing priorities and much more.

He said if a business is in financial difficulty the best thing to do is contact their bank as soon as possible. 

There are various options that can be put in place including re-financing, payment holidays, business overdrafts and loan consolidation.

The report also showed fewer than one in 10 SMEs (9%) now think their business is at risk of closing due to the impact of the pandemic.

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