Small businesses on the verge of expansion say their potential is being stifled by banks’ refusal to lend.
The survey of 500 small businesses identified up to 1.5 million “Caged Tigers” who are unable to hire more staff because of the way banks are choking off credit.
A third of those surveyed would increase staff numbers if they could obtain finance, while 31% would seek to grow their business more generally.
Businesses that would increase staff numbers would do so by an average of 12%. With SMEs responsible for employing approximately 13.8 million people in the UK, improved access to finance for the 1.5 million “Caged Tigers” could unlock more than 500,000 new jobs and drive down unemployment to pre-recession levels. This month’s official ONS figures show that unemployment dropped by just 7,000.
James Meekings, co-founder of Funding Circle, said: “With the right support, these frustrated businesses could be the future drivers of our economy, with the ripples of job creation being felt throughout UK industry.
“Not only would the economy feel the direct impact of a boost in employment but a quarter would also use finance to increase stock, supporting businesses throughout their supply chain.
“Instead, they risk becoming a lost generation of “Caged Tigers” stifled by a lack of business finance.”
The survey also revealed concerns from small businesses about the process of and access to bank loans.
Some 56% said the recent banking scandals have caused them to lose trust in the banks with 34% believing the banks don’t want to lend.
Meekings said: “Banks have betrayed their position of trust by putting personal gain ahead of the needs of the UK’s small businesses.
“It is unacceptable that five banks continue to account for 90% of all lending to small businesses, giving them a stranglehold on the potential for massive growth. The demand for greater competition in the market must be accelerated.”
Entrepreneur and Carphone Warehouse co-founder Sir Charles Dunstone, added: “Many businesses throughout the UK are ready for growth but have struggled over the last few years to obtain the finance they need. When I first started in business, access to finance was much simpler but times have changed and there is a risk that a group of exciting businesses will now be unable to reach their full potential.”
And Simon Walker, director general of the Institute of Directors, said: “Many businesses find that traditional bank lending is either too complex to access or simply not available at all.
“New, alternative sources of finance made available by new technologies are a welcome boon for many companies. “This is a great example of disruptive business models breaking open a market that had become hidebound, which means small companies can grow more easily and more swiftly than before.”