The face of funding is changing. In the closing days of 2015 peer-to-peer lending platform Funding Circle announced it had facilitated the lending of over £1 billion to SMEs since it started five years ago. 

This is just one example of the promising rise of alternative finance, yet the issue of access to funding remains as prevalent as ever. 38% of UK SMEs report their growth is still being stunted by insufficient access to funds.

This is largely because bank finance is still falling far short of pre-recession levels. In London alone, bank lending fell 40% in the third quarter of 2015. With UK banks committed to reducing risk they have also cut £5 million worth of SME overdrafts every day since 2011. This of course means another stream of funding is beyond reach for small businesses, leaving many stranded in the middle.

Recent research has found that more than half of SME owners are using personal funds or remortgaging their homes to prop up their business. Relying on personal loans or overdrafts often involves taking serious personal risks, and many personal funding products are simply not suited to the kind of flexibility that businesses need to ride out peaks and troughs in cashflow. Small issues can leave business leaders out of pocket, and more worrying still, out of security.

Relying on personal finance may be a dangerous option, but if there appears to be no other choice where else can you turn?

Speak to an expert

A professional advisor can help figure out a plan to ensure that your financial situation is secure and supports your plans for growth. This is where great accountants really prove their value and some have partnerships with investment networks for entrepreneurs to tap into.

Think through your strategy

Before you start searching for funding, be clear on two things: how much and why. Devising a strategy can help avoid nasty surprises down the line.

This goes as much for investors as lenders. Ask for too little money and the need for further investment rounds can damage credibility. Too much and you can out-price future potential funders.

Beyond the bank

Sadly the Government decided to get rid of many grants in favour of loans in last year’s Autumn Statement so entrepreneurs have now lost one of the few debt-free options available without giving up equity. Yet government-backed loans are still worth looking at as some offer low interest rates as well as repayment holidays.

Any business with valuable assets to lend against, from machinery to a strong book of invoices might also want to consider asset-based lending from specialist firms. Then there’s the option of considering equity investment from all sorts of sources ranging from business angels to crowdfunders.

The huge range of funding options now available is great news for small businesses, but both banks and alternative finance providers need to work hard to make their offering more accessible. Our recent alliance with Funding Xchange can help by making it easier to compare different routes.

Similarly, rather than leaving business owners relying on personal funding and its associated liabilities, advisors have a job to do explaining the options available and figuring out exactly what each individual business needs.

Finding the perfect balance of funding for your particular business model can be crucial to making the most of market opportunities and ultimately helping your business grow.


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