Demand for finance among Scottish SMEs outweighing level of supply - British Business Bank

Demand for finance among small businesses is exceeding the level of supply across Scotland, a new survey suggests.

Respondents also said small businesses in general will require additional finance over the next 12 to 18 months due to the pandemic. Picture: Jon Savage

The vast majority (84 per cent) of the Scottish business advisory community, made up of accountants, lawyers and business finance advisors, surveyed believe there are gaps in the supply of finance throughout all stages of company growth and development.

Nearly three-quarters (71 per cent) said the demand for finance outweighs the level of supply, according to the British Business Bank, whose research was conducted by Ipsos Mori.

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Respondents also said small businesses in general will require additional finance over the next 12 to 18 months due to the pandemic. Of those surveyed, 86 per cent in Scotland said smaller businesses would require additional debt finance and 79 per cent said the same about growth stage equity or venture capital.

Anticipated demand for additional early-stage equity investment over the next 12 to 18 months was found to be higher in Scotland (81 per cent) than the rest of the UK (68 per cent).

Scotland’s business advisory community are, however, more likely than the UK average to say that the local small business finance ecosystem offers adequate support for start-ups (63 per cent versus 45 per cent) and smaller businesses surviving in such uncertain times (65 per cent against 48 per cent).

Mark Sterritt, UK network director, Scotland, at British Business Bank, said: “Scotland has a rich community of ambitious smaller businesses and access to the right kind of finance plays a crucial role in their growth and development at every stage, from start-ups to well-established companies.

“Throughout the last 18 months we have witnessed first-hand the importance of supporting smaller businesses, and it is unsurprising to see an anticipated need for additional finance to support their continued recovery.

“Increased borrowing during the pandemic has perhaps contributed to the rising demand for early and growth stage equity, with some businesses unlikely to be in a position to take on additional debt finance. That said, we have already seen a record-breaking first quarter for small business equity investment across the UK, with £90.9 million invested in Scotland as the economy recovers and investor confidence begins to pick up.”

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