Barriers Faced by Small and Medium-sized Enterprises in Raising Finance from Banks

Purpose: This paper explores some of the barriers faced by UK entrepreneurs in raising bank finance to support and grow their businesses, specifically the impact of personal characteristics (ethnicity, gender and education). Methodology/Approach: The approach adopted for the research was a telephone survey of 400 small and medium-sized enterprises (SMEs) conducted by the Barclays Bank small business research team on behalf of the authors. Findings: We find education appears to make little difference to sources of finance, except that those educated to Advanced level seem more likely to use friends and family and to remortgage their home. Not surprisingly, graduates have the least difficulty in raising finance. Perhaps surprisingly, it seems that women find it easier to raise finance than men, although other literature points towards women as ‘discouraged borrowers’, a theory developed by Kon and Storey (2003). The research appears to confirm that ethnic minority businesses, particularly black entrepreneurs, have the greatest problem in raising finance. Research limitations/implications: The study is an important piece of research given the critical need of policy-makers to understand differentials between different types of entrepreneurs. It is brings new insights into its field – access to finance – and with respect especially to marginalised groups. Originality/value of paper: The paper adopts a different approach with a large sample and robust analysis to explore a critical need-to-know area in a new way – both for policy-makers and academics in the field of SME finance.