Time Finance released data showing UK businesses’ understanding of commercial finance, revealing loans as the most commonly used form of finance.
The survey revealed that 93% of businesses were aware of loans, while only 76% knew of invoice finance, 79% of asset finance, and 64% of asset-based lending (ABL).
Usage figures found that only 19% of businesses used asset-based lending, compared to 40% using loans.
Additionally, the small and medium-sized enterprise (SME) Finance Monitor reported that in the three months leading to February 2024, the most frequently used forms of finance for SMEs were credit cards at 17%, overdrafts at 13%, and bank loans at 11%.
Ed Rimmer, CEO at Time Finance, said: “What these figures highlight is a lack of understanding of the solutions and awareness of the solutions and 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 those core consumer products, which feel more familiar.”
Rimmer added: “While solutions such as loans are undoubtedly a valuable tool for businesses requiring a cash injection, there are more specialist funding solutions available.
“Options such as ABL, Invoice and Asset Finance, are all designed for very specific business needs.
“Crucially, they are tailored to help businesses grow, and are much more than just an immediate cashflow solution.”
He said: “Through Invoice Finance, SMEs can unlock working capital from unpaid invoices, through Asset Finance, businesses can fund new equipment, and Asset Based Lending can be used as a multi-product solution where businesses can access capital from existing assets within the business.
“These are just some benefits to the products, but despite these our recent study finds that there is a wide gap between people’s awareness of the products, and their actual usage, with 64% knowledgeable on ABL, but only 19% actually using it.”
He added: “We know that there is an education process needed, which is why we’re urging businesses to put down any preconceptions of finance solutions and get to know their options properly.
“By reaching for the more consumer-style products they know and trust, businesses could be missing out on the potential benefits of other alternative solutions.”
