Third of SMEs want to expand but are unaware of financial options.

Many business owners are keen to expand their operations but don't know which way to turn, according to new research.

Many business owners are keen to expand their operations but don't know which way to turn, according to new research.

In a survey of 505 directors and owners at small and medium sized businesses (SMEs), one in three (33%) said they want to grow their businesses but are unsure of how best to achieve that growth.

The research -- commissioned by British Business Bank, the UK government-owned economic development bank -- illustrates the value of expert financial advice for growing businesses.

Often, smaller businesses don’t consider, or are not aware of, the alternative finance options available to them. For example, only 5% of the businesses surveyed have considered angel investment and only 7% have considered crowdfunding.

To some extent, there is a generation gap -- with younger business owners more likely to be aware of, or to have used, alternative growth finance options. One in five (19%) millennials (under-35s) have considered crowdfunding, compared to just 3% of those aged over 35.

A report last year by the Cambridge Centre for Alternative Finance (CCAF), part of the University of Cambridge, found that alternative finance is becoming an increasingly important source of funding for start-ups and smaller businesses.

"With equity-based crowdfunding now accounting for 17% of all seed and venture stage equity investment in the UK, and peer-to-peer business lending providing an equivalent of 15% of all new loans lent to small businesses by UK banks, alternative finance has entered the mainstream and is likely here to stay," said Bryan Zhang, executive director of the CCAF, in a foreword to the report.

Peer-to-peer business lending was the largest market segment in 2016, the latest year for which figures were available, growing by 36% to reach £1.23bn, followed by peer-to-peer consumer lending at £1.17bn (up 47%) and peer-to-peer property lending at £1.15bn (up 88%), as the market diversifies.

These market categories were followed by invoice trading at £452m, equity-based crowdfunding at £272m, real estate crowdfunding at £71m and reward-based crowdfunding at £48m.

Commenting on the survey findings, British Business Bank non-executive director Piers Linney said that businesses need to look beyond the high street to finance their growth.

"Getting investment for your business does not have to be as scary as going into the Dragons’ Den," he explained. "There are plenty of ways to get finance and access support -- the challenge is knowing where to look, making the time to find out about them and getting investor ready."

If you've got the know-how to help SMEs understand all their financing options, get in touch with Outbound Solutions! We help connect business owners with financial advisers who can provide clarity and guidance.


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