The second Access to Finance report published by Enterprise Northern Ireland and the British Business Bank has found that 20% of SMEs in Northern Ireland experience barriers to accessing finance – a rate which places Northern Ireland significantly ahead of Scotland (42%) and slightly ahead of Wales (21%).
The most frequently reported issues for those who reported experiencing barriers to finance include: the highest shares of respondents that identified barriers mentioning ability to obtain/repay finance (40%), time/complexity of finance applications (31%) and poor perceptions of/relationships with finance providers (18%). Mid Ulster SMEs were the most likely to report barriers to accessing finance (41%), with Fermanagh SMEs the least like to report such barriers (15%).
Just under half (48%) smaller businesses in Northern Ireland as a whole reported requiring additional financing over the next 12 months. Of these, nearly three quarters (74%) said they had a requirement at or below £50,000, with another 18% of eligible respondents stating a requirement between £50,000 and £250,000 and the remaining 9% a larger requirement.
The most common finance forms that Northern Ireland based businesses with a finance need anticipated accessing over the next year were business loans and grants, both mentioned by 45% of respondents. Almost six in 10 (59%) smaller businesses that anticipated needing finance over the coming year intended to use it for working capital, while a similar share (58%) also indicated they would use it for capital expenditure. Among Northern Ireland based businesses that anticipated needing it over the next year, 61% felt confident in their ability to secure it.
In terms of sources of additional finance, Covid loans remain the most commonly used finance for smaller businesses across Northern Ireland five years after the pandemic.
24% of respondents across Northern Ireland were either still using or repaying finance obtained from one of the government loan guarantee schemes, all of which closed for applications in March 2021. In Mid Ulster, 42% of smaller businesses were using Covid loans.
Credit cards were the second most prevalent source of financing, with 17% of smaller firms making use of them and 12% using business overdraft facilities. The relative popularity of credit cards as a source of business finance is likely due to their ease of access and quick approval process. While this can help address short-term cash flow issues it may also be connected to a lack of awareness of alternative types of finance.
Respondents based in Belfast seem far more likely to report they expected to require additional finance over the next 12 months than their counterparts elsewhere in a statistically significant way, while those based in the North East/East and South regions were slightly less likely to report this.
There were statistically significant differences detected across different region of Northern Ireland on the share of businesses that anticipated requiring amounts over £250,000, suggesting that respondents in Belfast were the most likely to report they had a finance requirement in this bracket. Smaller businesses based in the Mid Ulster region were also particularly inclined to report an additional finance requirement between £50,000 and £250,000.
Smaller businesses’ confidence in securing additional finance over the next 12 months differed in a statistically significant way in Belfast, where businesses were slightly less inclined to express confidence and in the Mid Ulster and North West regions, where confidence levels were the highest.
One in five Northern Ireland SMEs experience barriers in accessing finance. Pictured is Michael McQuillan, Chief Executive, Enterprise NI
Speaking upon the launch of the report, Michael McQuillan, Chief Executive, Enterprise NI, said:
“This important report shows that significant progress has been made since last year’s report, when it was found that over half of Northern Ireland’s SMEs did not feel confident in their ability to secure funding. To see this year’s report state that 61% are now confident in their ability to secure funding shows the confidence that has returned to the market in the last 12 months.
“However, we have seen little movement in the proportion of our SMEs experiencing barriers to accessing finance, with the rate having fallen from 21% to 20%. This shows that work remains to be done on the kinds of support available to our SMEs to ensure that they are accessing the funding that they need.
“Enterprise Northern Ireland saw a record year in both our Start Up Loans and our NI Small Business Loan fund in the financial year ending April 2024, and expect to see yet another when figures are published for the year ending April 2025. It is clear that the appetite is there and the entrepreneurial spark has returned to Northern Ireland. The onus is now on capitalising on this appetite through government and enterprise co-designing enterprise support that removes any barriers to the access of financing.”
Susan Nightingale, Director Devolved Nations, UK Network, British Business Bank, said:
“Whether based in Newry or Newtownabbey, Cookstown or Craigavon, at British Business Bank we are fully committed to ensuring every business across Northern Ireland has equal access to capital. Using research like this to better understand how finance usage, barriers and future finance needs vary across the geography, allows us to tailor our programmes and engagement strategies more effectively.
“We can see from the report findings, there is a strong propensity for businesses across Northern Ireland to use the more traditional types of finance. Whilst credit cards may be a viable option for incidental business expenses, they should not be used to fund ongoing working capital requirements or longer-term growth plans. A greater awareness of other options, such as invoice finance or equity finance, and their benefits may be the key to ensuring longevity and unlocking greater growth potential for businesses here.”