59% of start-ups rejected for traditional funding in last two years

More than half (59 per cent) of UK start-ups have been rejected for a bank loan to kick-start their business in the last two years, according to a study by UK business angel network, Angels Den.
 
Their survey of 821 British entrepreneurs that have launched small businesses in the last two years found that less than a fifth (19 per cent) of business owners had successfully obtained financial investment in the form of traditional bank loans.
 
More than half (58 per cent) of entrepreneurs surveyed opted to use a combination of savings and money borrowed from family and friends to get their venture up and running.
 
The start-up sectors most frequently declined traditional bank loans included technology (14 per cent), food and drink (eight per cent) and health and fitness (seven per cent).
 
Around a third (32 per cent) of start-ups that had unsuccessfully applied for a bank loan believed their unrealistic financial predictions were the key cause for concern from lenders, while 28 per cent believed their lack of business experience counted against them.
 
Other reasons banks had declined start-ups for funding included their age (16 per cent) and poor credit rating (nine per cent).
 
Bill Morrow, co-founder and director of Angels Den, said: “Unfortunately, it is all too often the case these days that promising start-ups with an excellent service or product to promote fall at the last hurdle, whilst trying to secure traditional investment.
 
“We’re witnessing a number of start-up businesses turning to angel investors and online crowdfunding in order to secure investment.
 
“Not only is it a fantastic way of raising investment, it also gives you the chance to get some experienced and well connected business people on board.”

Last updated: 11th September 2014