New research from Time Finance has revealed that many UK businesses default to consumer-style financial products rather than exploring specialist funding solutions tailored to their needs.

The Finance Apathy survey, conducted in partnership with Censuswide, found that while loans remain the most widely recognised and used form of finance, awareness and uptake of alternative business finance solutions remains low.

The study, which surveyed 500 SME owners and decision-makers, showed that 93% of businesses are aware of loans, compared to 76% for invoice finance, 79% for asset finance, and just 64% for asset-based lending (ABL). When it comes to actual usage, 40% of businesses currently rely on loans, while just 19% use ABL products.

SMEs RELYING ON CONSUMER FINANCE PRODUCTS

The research aligns with findings from the British Business Bank’s Small Business Finance Markets report, which found that 20% of SMEs use credit cards as their main source of finance.

Similarly, data from the SME Finance Monitor reported that, in the three months leading to February 2024, the most frequently used forms of SME finance were credit cards (17%); overdrafts (13%) and bank loans (11%).

CALL FOR SHIFT IN BUSINESS MINDSET

Ed Rimmer (pictured), CEO at Time Finance, believes these figures highlight a widespread misunderstanding of commercial finance options.

“What these figures highlight is a lack of understanding of the solutions and awareness of the 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 core consumer products because they feel more familiar. While loans can be a valuable tool for businesses needing a cash injection, there are more specialist funding solutions available that are designed for specific business needs and long-term growth.”

Rimmer pointed to invoice finance, asset finance, and asset-based lending as underutilised alternatives that could provide businesses with more sustainable financial solutions.

He added: “Despite the benefits of these products, our study shows a clear gap between awareness and actual usage. While 64% of businesses know about ABL, only 19% are using it.

“We know that an education process is needed, which is why we’re urging businesses to put aside any preconceptions about finance solutions and properly explore their options. By reaching for consumer-style products they know and trust, businesses could be missing out on the significant benefits that alternative finance solutions provide.”