Thinking like consumers a ‘real barrier’ for businesses looking for finance

Time Finance has released new data that reveals UK businesses’ true understandings, attitudes and behaviours towards commercial finance, with loans topping the bill as the most commonly and widely used form of finance.

Figures found that 93% of UK businesses are aware of loans, in comparison to only 76% who are aware of Invoice Finance, 79% of asset finance and 64% of asset based lending (ABL).

When mapped against respondents’ usage of these products, the gap widens even further. Only 19% of UK businesses are currently using ABL products, and nearly double that, at  40%, are using Loans.

The new figures, developed in partnership with Censuswide, form part of Time Finance’s Finance Apathy survey, which gathered insight from 500 SME owners and decision makers across the UK to understand attitudes towards business finance.

Highlighting an SME preference for more consumer-style products such as loans, the survey mirrors reports from the British Business Bank’s recent Small Business Finance Markets(1) report, which found that as many as 20% of SMEs use credit cards as their main source of finance.

Further to this, SME Finance Monitor(2) reported that in the three months leading to February 2024, the most frequently used forms of finance for SMEs were core consumer products such as credit cards (17%), overdrafts (13%), and bank loans (11%).

Speaking of these results, Ed Rimmer, CEO at Time Finance comments: “What these figures highlight is a lack of understanding of the solutions and awareness of the solutions and specialist support available to UK businesses. It’s clear that SMEs need to adopt more of a business mindset, and avoid thinking like consumers when it comes to their finances.

“All too often we see businesses opting for those core consumer products, which feel more familiar. While solutions such as loans are undoubtedly a valuable tool for businesses requiring a cash injection, there are more specialist funding solutions available. Options such as ABL, Invoice and Asset Finance, are all designed for very specific business needs. Crucially, they are tailored to help businesses grow, and are much more than just an immediate cashflow solution.

“Through invoice finance, SMEs can unlock working capital from unpaid invoices, through Asset Finance, businesses can fund new equipment, and asset based lending can be used as a multi-product solution where businesses can access capital from existing assets within the business.

“These are just some benefits to the products, but despite these our recent study finds that there is a wide gap between people’s awareness of the products, and their actual usage, with 64% knowledgeable on ABL, but only 19% actually using it. We know that there is an education process needed, which is why we’re urging businesses to put down any preconceptions of finance solutions and get to know their options properly. By reaching for the more consumer-style products they know and trust, businesses could be missing out on the potential benefits of other alternative solutions.”

1 British Business Bank, Small Business Finance Markets, 2023-24

2 SME Finance Monitor, An Independent Report by BVA BDRC, March 2024