Research reveals significant increases in credit refusal, driving business owners to seek out alternative funding options

Research commissioned by premier Invoice and Asset Based Lender (ABL), Venture Finance, has revealed that the number of business clients being refused finance by traditional lenders this year has almost tripled.

The study of 1000 UK accountants has found the credit restrictions driving that escalation is in turn stimulating renewed interest in alternative forms of funding solutions such as ABL.

Venture’s previous research in 2008 showed less than a fifth of accountants’ clients had been refused credit from traditional sources such as banks. However, in just 12 months, spurred by current recessive conditions this figure has rocketed to nearly two thirds (58 per cent).

The study charts the continued growth of ABL since 2007 and supports the Asset Based Finance Association (ABFA) 2008 survey, which found that 64 per cent of the financial industry saw ABL as a ‘mature product, having proven its worth in the market’.  The service is now second only to Venture Capital investment as other forms of funding have dried up or fallen victim to their own recessive contraction (such as bank loans or family hand-outs).

Other key findings from the research include:

• Businesses in the North East are suffering the most with a reported 73 per cent of accountants’ clients having been refused credit this year, compared to 48 per cent in the South East
• Amongst the accountants surveyed, the recruitment industry (24 per cent) is seen to be suffering the most from financial difficulty, followed by construction/property (23 per cent). Retail services are perceived to be the most stable
• Seventy-one per cent of accountants have seen an increase in clients suffering with bad debt, with over two thirds (70 per cent), believing services such as Bad Debt Protection are more important for business today than a year ago

Peter Ewen, Managing Director, Venture Finance, comments: “Our research lifts the lid on the state of British business in these challenging times. The significant rise in companies suffering bad debt, combined with restricted access to finance, has encouraged others to take out Bad Debt Protection for peace of mind.

“But it’s not all doom and gloom – whilst the rise in credit refusal by traditional lenders may suggest the business world has come to a complete halt, of course it hasn’t – business owners are just getting smarter and proactively reviewing their options.  As the UK economic slowdown continues,  it’s reassuring to see that nearly two thirds of business owners are responding proactively by seeking robust and responsive alternative sources of funding like Invoice and Asset Based Lending – however it surprises me the Government isn’t doing more to highlight this option to businesses both big and small.”

Peter Ewen – Managing Director, Venture Finance

Venture Finance – A premier independent Invoice Finance and Asset Based Lender with 20 years’ experience helping thousands of businesses.