By Lord Smith of Kelvin, Chairman, British Business Bank
Throughout my career I have been passionate about helping small businesses to get access to the right kind of finance that will help them invest, grow and achieve their ambitions.
One of the main reasons I became Chairman of the British Business Bank was to continue to advance access to finance for smaller businesses across the UK. We often hear that small businesses are being held back by a lack of funding, with many commentators frequently describing the ‘finance gap’ for SMEs.
There are two sides to this. The supply side is important, and the Bank plays a role in helping with this. Since we were set up in 2014 we have injected over £10 billion into the finance market for smaller businesses and increased the number of partners with whom we work to deliver such finance to over 120 – partners such as Funding Circle, Liberis and Metro Bank – helping to bring diversity and choice of both finance type and provider.
The finance gap for small business is not simply a supply-side issue, however. On the demand side there remains a knowledge gap, with many small businesses being unaware of the full range of options available.
According to polling carried out for British Business Bank earlier this year, one in three businesses in the UK are actively looking to grow but have no idea how to finance that growth. This was most pronounced for older business owners, who are significantly less likely to be aware of, or to have used, alternative growth finance options than their younger counterparts. One in five millennials, for example, have considered crowdfunding, compared to fewer than one in twenty over-35s.
British Business Bank research shows a little more than half of smaller businesses considered only one provider when they last needed external finance. That was most often their current bank, although a bank loan might not always be the most suitable form of finance.
As the UK government’s economic development bank, we want to help smaller businesses at every stage of their business journey – from start-up to high-growth scale-up – to understand the financial landscape and, ultimately, to be able to access the right finance for them.
We have been worked extensively with the FSB to develop products aimed at raising small businesses’ awareness of, and confidence in, the wide range of funding options in the market. This includes the Business Finance Guide, developed and co-published with the Institute of Chartered Accountants in England & Wales, and with the support of the FSB and 20 other leading business and finance organisations. Available to FSB branches and members in hardcopy and as an online tool, it allows small businesses to explore easily the full range of finance options available.
The Bank has also recently launched the Finance Hub – a new interactive website, developed with a range of industry partners and business groups, including the FSB, and dedicated to providing independent information on finance options specifically for scale-up, high growth and potential high growth businesses to help them see what’s really possible.
Access to the right type of finance opens up fantastic opportunities for businesses in any industry, so it is important for all businesses, wherever they are in the UK and on their business journey, to consider all the options so they can get the right finance for their needs.
Having access to clear and impartial information on finance options is a pre-requisite for further growth. It is an essential first step in enabling a business to shop around and get the best deal, on the right kind of finance, to help them grow and succeed.
What is more, it drives competition and improves the way finance markets operate for all of us.
If you are not clear on the full range of finance options available to your small business, you can learn about the many choices available at www.thebusinessfinanceguide.co.uk/bbb or follow the Guide on Facebook @TheBusinessFinanceGuide. If you are a business looking to grow rapidly, you can access our new Finance Hub at www.british-business-bank.co.uk/finance-hub.