Finance rejection is resulting in postponement of innovation and product development for 21% of SMEs, while 20% are holding back on workforce expansion. Credit: Ratana21/Shutterstock.

A recent study by British specialist lender Together has found that approximately 12% of small and medium enterprises (SMEs) in the UK facing rejections when applying for loans from mainstream lenders in the past year.  

This finance rejection is impacting the SME sector’s growth prospects, with 21% of business leaders postponing innovation efforts and new product development. 

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About 20% of the businesses are holding back on workforce expansion, the report found. 

The easing of rampant inflation presents a potential boom for UK SMEs, with leaders poised to invest an estimated £2.4trn ($3.03trn) over the next two years. However, funding woes remain a significant impediment, as highlighted by the research.  

The study also identified additional barriers to lending, with 17% of SMEs unable to secure business or personal credit cards and 10% facing challenges in remortgaging business properties or assets.  

According to the study, the knock-on effects of finance rejection include 29% of businesses delaying premises moves, 27% pausing property portfolio expansions, and 25% missing out on key property deals. 

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The impact extends to refurbishment delays for 22% of SMEs and 11% not investing in essential machinery, vehicles, or technology.  

To navigate these financial hurdles, 55% of SMEs are seeking alternative finance sources, and 14% UK SME businesses have already utilised bridging or short-term loans to facilitate growth, the report noted. 

Financial Reporter quoted Together chief commercial officer Ryan Etchells as saying: “The UK’s 5.5 million small and mid-sized business owners are champing at the bit to realise their investment and growth plans over the next two years. 

“It will be interesting to see whether the government, whichever it may be, will be able to deliver on the support the sector has to have to make these ambitions a reality. Further stabilising the dire impact of energy, labour and running costs is a must, as well as ensuring that the new party in power understands the financial support that these businesses need.”