# Nearly half of SMEs believe the economy is being stifled by reluctance to borrow
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2017-06-01
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: Overcoming 'Fear of Funding' in SMEs: Ultimate
Meta Description: Discover how SMEs are limiting their growth due to a 'fear of funding', despite high confidence in securing external finance. Explore the impact of
URL: https://financedigest.com/nearly-half-of-smes-believe-the-economy-is-being-stifled-by-reluctance-to-borrowhtml

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_A third are limiting their growth rather than take funding due to a ‘fear of funding’_

![Ron Robson](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/ron-robsonapproved-110117-200x300-1736843796403-compressed.jpg)

Ron Robson

Almost half (48%) of SMEs felt that British businesses are missing out on opportunities because of a reluctance to borrow, and 45% believe that the economy is being stifled because they won’t borrow.

Yet, almost a third (27%) of those SMEs are holding back the growth of their own business, due to a **‘fear of funding’**, by refusing to take external finance, [according to research](https://www.financedigest.com/senior-leaders-more-at-risk-of-burnout-than-ceos-according-to-new-research.html "Senior leaders more at risk of burnout than CEOs, according to new research") by Ultimate Finance.

The research, conducted by BDRC Continental on behalf of SME [funding partner](https://www.financedigest.com/sommet-education-partners-with-kingdom-of-saudi-arabias-tourism-development-fund.html "Sommet Education partners with Kingdom of Saudi Arabia’s Tourism Development Fund") Ultimate Finance, challenges industry perception that small businesses are not borrowing because of an access issue.

In fact, confidence in securing finance is high; 59% of SMEs were sure they would get the money they needed, if they applied, and 57% felt they had a good understanding of the finance options available to them.

Instead, this bigger issue around the ‘fear of funding’ [stems from a belief that external funding results in a loss](https://www.financedigest.com/yen-stems-losses-after-report-of-boj-rate-check-hints-on-intervention.html "Yen stems losses after report of BOJ rate check, hints on intervention") of independence (47%), that borrowing can cause more worries (44%) and that taking external funding is too risky in the current economic climate (37%).

Ron Robson, CEO of Ultimate Finance, commented: “It’s not good news for the UK economy, if SMEs understand the benefits of borrowing, yet do not seek the funding that could have a positive effect on their operation.

“In many ways it’s not a surprise; [years of economic instability which preceded Brexit has led to a general uncertainty on ‘what next’](https://www.financedigest.com/a-network-of-networks-will-ceos-be-replaced-by-ai-in-the-next-10-years.html "A Network of Networks: Will CEOs be Replaced by AI in the Next 10 Years?").

“The bigger challenge to tackle is that [SMEs have a fear of funding and are not seeking finance](https://www.financedigest.com/forecast-based-financing-for-smes.html "Forecast-based financing for SMEs") when they need it. This is contrary to messages that lenders aren’t lending, which is simply not the case; borrowing figures are down [due to demand](https://www.financedigest.com/norsk-hydro-keeps-some-aluminium-capacity-offline-due-to-weaker-demand.html "Norsk Hydro keeps some aluminium capacity offline due to weaker demand"). This mixed communication is contributing to confusion and takes [attention away from educating SMEs about the positive impact](https://www.financedigest.com/inskin-media-makes-a-number-of-strategic-hires-as-it-furthers-its-mission-to-maximise-attention-and-impact-in-digital-campaigns.html "Inskin Media makes a number of strategic hires as it furthers its mission to maximise attention and impact in digital campaigns") borrowing money can have.”

The report by Ultimate Finance also looked at how borrowing can support [business growth](https://www.financedigest.com/euro-zone-business-growth-slowed-in-may-as-factories-struggled-pmi.html "Euro zone business growth slowed in May as factories struggled-PMI"), and found that on average 27% of SMEs that do borrow, attribute external funding as a key reason for their business growth.

For larger SMEs (with 50-249 employees) this number rose to over a third (35%).

Over a fifth (21%) of businesses that have borrowed recently, also felt that without external funding, they would not be in operation today.

Robson continued: “There is clear evidence that external funding can have a hugely positive impact on an SME.

“As well as the peace of mind that comes with knowing that the basic bills will be covered, the right funding can be used for positive [business investment](https://www.financedigest.com/japanese-businesses-pledge-uk-investment-ahead-of-sunak-meeting.html "Japanese businesses pledge UK investment ahead of Sunak meeting"), for example to upgrade machinery, fulfil a large order or negotiate cash-upfront discounts with suppliers, all of which help to lead to growth.

““The [funding sector](https://www.financedigest.com/blackrock-fund-targets-greening-of-materials-sector.html "BlackRock fund targets greening of materials sector") and the government need to come together to help change the negative perceptions around borrowing.

“Only then can we start to instil a sense of confidence in borrowing in SMEs, and support them to grow.”

For further information go to www.ultimatefinance.com


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