Small businesses slash use of external funding

Small businesses in the UK are still not borrowing money to fund their growth, according to a recent survey by the SME Finance Monitor. Figures show that only 39% had used external finance in the first quarter of 2013, a drop from 50% in the same quarter last year. It is the lowest rate since the survey began in early 2011.

However, the causes are far from clear-cut. It appears that some businesses (7% in fact) that were seeking finance have been discouraged and have subsequently given up, perhaps due to the hassle of the process or because of unsuccessful inquiries with their bank. However, the majority of companies surveyed didn’t have any intentions of applying for funding at all, suggesting that in the current economic climate businesses are choosing a risk-averse route, preferring to pay down debts instead of borrowing.

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