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Small businesses demand better access to finance ahead of Budget

  • Two-thirds of small businesses want the Government to take concrete action on improving access to finance

  • iwoca’s small business customers support measures on business rates and skills, but have not warmed to Boris Johnson’s election pledges on infrastructure

  • Small businesses in iwoca’s community also voice concerns about policies which would increase costs, such as the rise in the National Living Wage and freezing of Corporation Tax cuts

  • Business confidence has improved, but iwoca’s small businesses don’t believe Brexit uncertainty is over and want the Government to prioritise negotiating a trade deal with the EU over the US
  • In a submission to HM Treasury, iwoca highlights a number of policies which would help lenders provide the finance small businesses need, including reform of the Bank Referral Scheme

Small businesses are urging the Government to take decisive steps to improve access to finance for SMEs, according to new research by iwoca.

In a survey of iwoca’s small business community, 66% believe that creating policies to make it easier for SMEs to apply for finance should be a priority in the upcoming Budget. This follows a continued squeeze in small business lending since the financial crisis, with Bank of England figures showing finance to SMEs by the main high street banks falling by 6% between 2014 and 2019. Such is the concern over this issue, that over one third in this study (35%) want access to finance to be the main focus of the Government over the next five years. 

During the General Election campaign, the Government pointed to a number of measures set to be announced in its first Budget, including on business rates and skills. iwoca’s small businesses are broadly supportive of these, with over half (51%) wanting the Government to prioritise a review of business rates and 30% backing further investment in the National Skills Fund.

However, small businesses are less keen on many of the Government’s headline infrastructure commitments. Only 21% in this study want ministers to focus on spending an additional £100 billion on infrastructure, with just 16% calling on the Government to prioritise the roll-out of full-fibre broadband. iwoca’s customers have also highlighted a number of policies that would heighten financial pressures which they want excluded from the Budget:

  • 42% don’t want further rises in the National Living Wage
  • Over one third (38%) expressed concerns at the freezing of Corporate Tax cuts
  • Three in ten (29%) are against the scrapping of Entrepreneurs Relief 

Turning to the wider economy, 57% of iwoca customers say they’re confident that the business environment will improve over the next 12 months (23% are not). But concerns also remain within the small business community about the UK’s future relationship with the EU. Only 23% of iwoca’s customers believe that uncertainty over Brexit is over (61% do not). And whilst the Government has signalled its willingness to walk away from trade talks with the EU, business owners want ministers to prioritise negotiating a trade deal with Brussels over other major economies. Almost two thirds (63%) say that a trade deal with the EU is very important to their business, whilst only 39% view a partnership with the US as vital to their operations.

 

Submission to HM Treasury 

With small businesses demanding action from the Chancellor on access to finance, iwoca has submitted a three point plan to HM Treasury which identifies specific actions Government should take to make it easier for lenders to provide the finance SMEs crave. iwoca’s key ask is reform of the Bank Referral Scheme, which since its creation in 2016 has resulted in just 1,695 successful referrals worth just over £32 million. Indeed, just one in ten small businesses say they have been made aware of the scheme after they’ve unsuccessfully applied for finance. Other measures include:

  • Backing the Open Finance initiative by the Bank of England to create a portable KYC and credit file. As a first step to achieve this, the Government should allow Companies House to share information to accredited financial services firms to make customer onboarding more seamless from a KYC/AML perspective
  • Broadening guarantee schemes created by the British Business Bank to make them more accommodating for non-bank lenders

 

Christoph Rieche, CEO and cofounder of iwoca said: ‘We’re on a mission to finance one million small businesses so that they can thrive, create jobs and make our communities flourish. 

‘We hope the Chancellor will use his first Budget to make it clear that he’s backing the 5.9 million small businesses that drive our economy forward by removing barriers that hold them back. 

‘We would welcome the opportunity to work closer with the Government to ensure their actions match the needs of small businesses up and down the country.’

 

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