Small businesses show renewed interest in external finance in 2023
The use of external finance for small businesses in the West Midlands increased last year, while SMEs more widely remain cautiously optimistic about the economy, according to a new report.
The British Business Bank’s fourth Nations and Regions Tracker report showed its use increased to almost half (49%) of small businesses in the region up 14 percentage points in 2022.
READ MORE: Signs of recovery in use of external finance by South West businesses
More broadly across the UK, smaller businesses showed renewed interest in external finance last year with a growing number using it to seek investments, which had previously been delayed.
The report also showed an increasing reliance on overdrafts, with SMEs in the West Midlands some of the most reliant on bank overdrafts with 16% using them - up 5 percentage points on the previous year.
"Interest in external finance appears to be growing amongst smaller businesses in the West Midlands, indicating confidence in their plans for growth," commented Victoria Mears, UK Network Director for the Midlands, British Business Bank.
"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."
Less positively, the report also found that 58% of smaller businesses in the region viewed trading conditions as presenting "more threats than opportunities" and that the number of announced equity deals in the West Midlands fell by 21% in 2023 to 71 deals - down from 86 deals in the previous year.
However, nationally, early signs from the first half of 2024 indicate stabilisation and a positive outlook for the year ahead.
In Q1 2024, equity funding for smaller businesses across the UK increased by 7% compared to the same period in 2023, suggesting renewed investor confidence.
Nationally, credit cards were the most used and fastest growing finance type with nearly one in five (17%) smaller businesses using them
