Report reveals rise in external finance use by East Midlands small businesses

A recent report from the British Business Bank reveals that the use of external finance by smaller businesses in the East Midlands has risen.

The use of external finance by smaller businesses has risen to 48% in 2023, a 13% increase from the previous year.

However, 55% of these businesses believe the current trading environment poses more threats than opportunities.

In the East Midlands, the use of credit cards as a form of external finance grew, with 20% of smaller firms utilising this option in 2023, a 9 percentage point rise.

Nationally, credit cards have become the most commonly used and fastest-growing finance option, with nearly one in five smaller businesses relying on them.

The report, part of the fourth Nations and Regions Tracker, indicates growth in external finance usage across the UK, with 11 out of 12 regions reporting increases.

The East and West Midlands, North East, South East, Northern Ireland, and Wales all experienced double-digit growth.

Despite a renewed interest in external finance, many smaller businesses remain cautious.

Of those surveyed, 36% expressed willingness to use finance for growth, while 34% anticipated needing financing in the next year.

However, inflation remains a concern, with 76% of businesses still feeling the impact of rising costs.

Although inflationary pressures eased somewhat in 2023, the majority (55%) still view current conditions as more threatening than beneficial.

The UK equity market saw a decline in announced deals in 2023, with the East Midlands experiencing a 9% drop to 58 deals, down from 63 the previous year.

In contrast, the number of equity deals outside London fell by 22% year-on-year to 1,098, with total investment dropping by 48% to £3.27bn.

Despite this decline, early data from the first half of 2024 shows signs of stabilisation.

In Q1 2024, equity funding for UK smaller businesses increased by 7% compared to the same period in 2023, suggesting a return of investor confidence.

Victoria Mears, UK Network director for the Midlands, British Business Bank said: “Interest in external finance appears to be growing amongst smaller businesses in the East Midlands, indicating confidence in their growth plans.

“It is important for businesses to access the right kind of external funding for them. The British Business Bank is here to help our region’s founders do just that – and realise their ambitions for growth as they look towards the future.”