Research indicates that Britons are in the dark about the funding options available.
According to new research by Crowdfinders, UK entrepreneurs turn to their personal savings, friends/families and banks first. This is despite the fact that many (64%) believe that its a dead end.
Crowdfinders states that over a third (35%) of entrepreneurial Britain said they would resort to their own personal savings when starting or growing a business. The second most popular option as indicated by the survey of over 2,000 UK adults was banks and other financial institutions (28%). Their findings show that 15% would seek financial support from friends and family. Just under half (45%) do not have any idea how they would find funding to start a business.
Crowdfinders balances their research with data from Funding Options that states since 2011 banks have withdrawn £5.7 million a day in small business overdrafts alone, cutting available credit by £8.4 billion at an estimated cost to the economy of £2.9 billion.
Crowdfinders says the problem has been highlighted by the Government announced Patient Capital Review. This program is designed to identify the barriers facing entrepreneurs held back by the increasing inaccessibility of growth capital.
Luke Davis, Co-Founder of Crowdfinders, said there has been a long standing problem where typically only entrepreneurs with their own resources or wealthy family and friends, may access the capital required to start or grow a business.
“The alternative finance revolution was meant to democratise access to funding; however, more needs to be done to connect entrepreneurs with potential investors so they no longer have to rely on personal savings or the bank of mum and dad,” says Davis. “[Our] new pre-crowd investment platform aims to level the playing field by helping entrepreneurs generate the first 30% of a funding round via its own network of investors. Not only does this early momentum dramatically increase the chances of a funding round successfully reaching its target, but the pre-crowd platform also ensures entrepreneurs can access scale-up investment without needing a network of wealthy contacts to get a business off the ground.”
Crowdfinders believes the financial shortfall is having a deleterious impact on Britain’s SMEs. This issue affecting UK SMEs hit the spotlight recently with Philip Hammond’s first Autumn Statement, where he announced the capital review program.
Crowdfinders wants to address this issue, democratise SME investment, and give entrepreneurs the support they need to secure important growth finance through a crowdfunding raise. Crowdfinders has also launched a £100 million funding drive to support innovative UK entrepreneurs.