The Brief: Many UK businesses are struggling to obtain lender financing since some banks are now “increasingly nervous” about offering credit to small enterprises, according to Reuters’ research and interviews. Surging raw material prices, higher debt costs and wages continue to strain businesses.
Why It Matters: A 2021 survey by British Business Bank revealed that 44% of SMEs expect to seek financing for their business in the next 12 months, but one in five of them are concerned about their capability to repay their loans.
Finanze Business Foresights: Small and medium businesses often have high failure rates and shorter years of operations compared to large enterprises. This makes SMEs riskier to lenders along with often lacking high-value collateral compared with established firms. Their inability to obtain credit means that owners will have to draw from their personal savings or seek financing from family members to fund their expenses and growth plans. With tighter credit due to the risk of default, more government intervention is needed, to avoid further insolvencies and provide businesses with the means to survive the ongoing financial crisis.
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