Young male broker and businessman happily shake hands.

Bridging the SME investment gap.

05 Jul 2024 | 4 min

What can you do if you can’t get access to finance through a mainstream lender? That’s the question facing the 5.5 million small to medium sized enterprises, or SMEs, currently operating in the UK’s private business sector.

Unfortunately, it seems that a lot of SME Directors don’t have the answer at the moment, and it’s causing them to miss out opportunities to grow their business. This lack of investment from such a crucial sector is also putting strain on the wider UK economy.

Why are SMEs not investing?

It’s not from a lack of ambition – Together’s latest survey showed that small to medium-sized businesses want to invest £448,155 on average over the next two years. So, what’s stopping them? There are a number of barriers, and some are easier to solve than others, but for many SME businesses, simply getting access to reliable finance has gotten increasingly difficult.

When we spoke to 1,002 directors of SME businesses1:

  • Nearly three quarters (72%) told us that mainstream banks were being overly cautious when it came to business lending.

  • Nearly half (45%) also said that they’ve avoided traditional lenders due to the risk of being rejected.

  • 40% of SME directors confessed that they didn’t know where else to go for lending other than mainstream banks and building societies.

  • 12% confirmed that they’d been rejected for funding by high street lenders vs under 7% being rejected by specialist lenders.

40% of SME directors confessed that they didn’t know where else to go for lending other than mainstream banks and building societies.

How is a lack of access to finance affecting SMEs?

So, there’s a lack of mainstream support for SMEs, a group that makes up over 99% of the UK’s private business. That’s a big issue in itself.

But, if you add in the fact that directors often don’t know about other financial lenders and options that could help them, it creates a perfect storm; businesses with the ambition to grow are being hampered and are putting off vital investments.

The directors we spoke to said that funding blocks had led them to:

  • Put off moving premises

  • Stop expanding their portfolios

  • Delay refurbishing their businesses

  • Postpone product launches

Bridging loans as a solution

As well as being inflexible with their criteria, many mainstream lenders don’t offer or advertise a range of products that could support investment. One such example is bridging loans, a short-term solution that can be used to raise the capital needed to turn opportunity into investment.

  • Over a third (37%) of SME directors don’t know how bridging finance works. Are you one of them? Here’s our blog of the top ten frequently asked questions to bring you up to speed.

How are SMEs using bridging loans?

The beauty of bridging loans is that they can be used for a range of personal and commercial scenarios. Here are the most popular ways our surveyed SME directors2 used them to get the investment they needed:

  • Buying and moving to new premises (without downtime)

A quarter (25%) used a bridging loan to buy a new business property before selling their existing one. Not only did this allow them to get moving quicker, but resulted in fewer trading days being lost, as the new site could be set up while business continued at the existing office, factory, shop or restaurant.

  • Refurbing and renovating existing businesses

Over 20% said that they used the bridging loan to refurbish or renovate a commercial property, helping them stay compliant with regulations, work more cost efficiently and attract more customers.

  • Building prosperous portfolios

Purchasing residential properties was also a popular usage, with Buy to Let landlords looking to add to their portfolios and investors aiming to flip houses for profit.

  • Acting quickly at auction

Bridging loans also came to the rescue of businesses buying property at auction as they can be quickly arranged to meet the 28-day auction completion deadline.

  • Getting cash flowing and business moving

Other examples included paying off tax bills and investing in key infrastructure such as IT equipment, machinery and stock.

What are the risks of using bridging finance?

Bridging loans are a short-term solution only. You’ll need to repay the full loan amount, any accrued interest and any other fees (such as arrangement fees) within 12 months. If you don’t repay the loan in time, and can’t agree an alternative payment structure with your lender, any property that was used as security could be at risk of repossession. You should always seek independent financial advice before making any decisions.

Could bridging finance help your business turn an opportunity into investment? You can find more information in our blogs below. Or, get in touch with our friendly, experienced team to get your business moving from A to Buy.

Get in touch

1 Research commissioned by Together and conducted by Opinion Matters research between 17-21 May 2024 among 1,002 DMS/ Directors of SMEs. Opinion Matters abides by and employs members of the Market Research Society which is based on the ESOMAR principles.

2 Stated percentages based on the number of DMS / Directors of SMEs that answered that they or their business had used bridging finance before (716 out of 1,002 surveyed).

Exit Process

Let's get you through to the right team.

Any property used as security, including your home, may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

Articles on our website are designed to be useful for our customers, and potential customers. A variety of different topics are covered, touching on legal, taxation, financial, and practical issues. However, we offer no warranty or assurance that the content is accurate in all respects, and you should not therefore act in reliance on any of the information presented here. We would always recommend that you consult with qualified professionals with specific knowledge of your circumstances before proceeding (for example: a solicitor, surveyor or accountant, as the case may be).

Lending decisions are subject to an affordability/creditworthiness assessment.

All content factually correct at the time of publishing.

Intermediaries Business Bridging Loan