Young entrepreneurs are being held back by a lack of funding as more than half of small business owners aged 16-24 simply avoid seeking funding as they see applying for a loan as an admission of failure.
- Half (52.6%) of young entrepreneurs say applying for a loan is an admission of failure
- And fifth (21.4%) of young business owners say it makes them feel like a failure if they’re turned down
- 40% of young business owners say the process comes with a negative stigma
We found that 52.6% of young business owners think applying for a loan means they’ve failed, and a third (31.6%) say the risks of being turned down outweigh the benefits to their business.
It is perhaps unsurprising that so many young business owners are so reluctant to ask for financial help. Overall, the findings show the biggest challenge to business growth is an unfamiliarity with the language used by lenders.
Almost half (47.8%) of small business owners say they wouldn’t apply for financial help because they do not understand the words in the application, but for young business owners this inhibition is a source of shame. For 40% of young business owners the application process comes with a negative stigma, arising from a personal embarrassment and the possibility they might be turned down for finance.
A fifth (21.4%) of young business owners said they would feel like a failure if they were turned down and a quarter (25.9%) of older business owners say they would feel the same way too.
Peter Alderson, LDF managing director, says: “Financial help is a necessary part of business growth, there is no need to feel like a failure. Looking at these findings, it seems like many young business owners are approaching business growth as if it’s complex chicken and egg problem when, in fact, financial help is the stepping stone to success. There are now lenders who are helping to make financial assistance simpler for everyone.
“Things are difficult enough; there are five and half million SMEs facing uncertainty after last year’s Brexit vote and official reports show that over £26 billion is owed to small firms across the country. It’s not just wealthy entrepreneurs who should be allowed financial help.”
Elsewhere, research shows that those small business owners over 55 are the least likely to be put off by financial language (21%), in contrast to younger business owners. Nearly three in five (58.2%) young entrepreneurs say financial language has put them off applying for finance.
The research was conducted for LDF by Opinion Matters between 27.01.17 and 06.02.17 and sampled 506 SME decision makers in construction, professional services, administrative services, wholesale & retail, human health/medical and manufacturing.