ThinCats research highlights major differences between small and mid-sized SME funding needs
The survey covered 2,000 SMEs comprising 1,200 small companies (less than 10 employees) and 800 mid-sized businesses (10-249 employees).The research revealed significant differences in the how, why and where SMEs source their external funding and their plans for seeking funding over the next 12 months.
The key findings are:
- 75 per cent of small businesses say they have never applied for external debt funding, compared to 38 per cent of mid-sized businesses.
- Mid-sized businesses are three times as likely (17% vs 5%) to seek external debt in the next twelve months compared to small companies, suggesting a higher degree of resilience and business confidence among the mid-sized.
- Mid-sized businesses were also more likely to seek advice about funding options than their smaller counterparts. 56 per cent of small businesses said they did not seek any advice, whereas mid-sized businesses were much more likely to speak to an adviser. Just under one-quarter (24%) said they spoke to a commercial finance broker, 23 per cent spoke to an accountant and 17% to a corporate finance or debt adviser.
- Of those companies that have secured finance most recently, most businesses were looking for working capital (42%), followed by asset backed finance (33%) then growth capital (21%). When comparing the needs between small and mid-sized businesses, there is a significantly greater take up of growth capital among mid-sized businesses (27% against 13%).
- High street banks were the most frequently used source of external debt finance used by 56% of SMEs for their most recent funding followed by alternative lenders (11%), asset-backed lenders (8%) and challenger banks (6%). 60% of small companies used a traditional high street bank compared to 54% of mid-sized businesses.
- Businesses taking out funding of more than £10m are more likely to seek advice from a corporate finance adviser (59%) than any other adviser, whereas businesses securing finance between £250k-£5m are most likely to go through an accountant or broker. Businesses seeking funding of less than £50k are now more likely not to seek advice at all.
- High street banks remain the most popular source of capital for businesses looking for finance between £10k-£5m (50%+) but this shifts significantly for businesses looking to secure larger loans where high street popularity is halved to 28% and falls further to 14% for businesses getting loans of £10-15m. Direct lenders and private debt funds are the most common source of capital for this quantum at 28%.
“Although it’s easy to assume that all SMEs have similar funding needs, this research shows distinct differences between the “Ss”, which represent approximately 90% of the UK’s SME universe, and the “Ms”, although smaller in number, who account for around 25% of GDP. Mid-sized SMEs are an engine of growth and due to their resilience are more confident about taking on external funding. As a result of mid-sized SMEs’ more complex fundings needs, they are more likely to use an alternative lender and also more likely to use an adviser to help find the best debt solution for their needs.”Ravi Anand, Managing Director, ThinCats
All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2003 decision makers. Fieldwork was undertaken between 18th - 26th September 2023. The survey was carried out online. The figures have been weighted and are representative of British business size and region.
