Access to finance will enhance entrepreneurship opportunities

Entrepreneurs find that access to finance is still the biggest barrier to succeeding in business, a study has shown.

The UK has a strong base of entrepreneurs setting up new businesses every day – and small and medium-sized enterprises are the lifeblood of the nation’s economy. Yet according to a new study from EY, there are still obstacles holding them back from setting up and growing their businesses.

Half the UK entrepreneurs surveyed by the firm said that sourcing finance is the biggest barrier to establishing a new business in the country.

That’s more than any other reason, in spite of steps taken by the government to promote business lending and encourage banks to take more risks on promising startups and business ideas, as well as financing growth for more established firms.

Considering the fact that there was little concern about market conditions or a lack of business opportunities, which attracted seven and four per cent of the vote respectively, it seems that difficulties in finding finance are really hampering the potential of new companies and the UK economy as a result.

It was the construction industry where struggles with finance were the biggest concern. Nine out of ten construction entrepreneurs said they had problems with finding finance; in contrast, a quarter of those in the pharmaceuticals industry said the same.

But in some cases, it appeared that many companies were not actually considering external sources of finance.

Just a fifth said they would look to their bank for finance, while 16 per cent saw private equity as an alternative and just three per cent would think about venture capital.

Instead, some 27 per cent said they were more likely to fund growth themselves through retaining profits.

Stuart Watson, leader of EY’s Entrepreneur of the Year, said that the various incentives and funding options available to businesses require time to be reviewed and considered. In the meantime, governments need to consider how they can promote further investment in growing companies.

“Matching funding to business growth plans remains a key area of concern for ambitious entrepreneurs, not least as rapid growth tends to absorb cash,” he explained.

“Entrepreneurial business leaders that develop strong controls over cash and cash forecasting as they grow find this enables them to plan early for fund raising and helps to attract investors.”