Increasing Number of Businesses Use Savings to Plug Lending Gap
New research from Investec Bank reveals that 15% of businesses with an annual turnover of £1m or more have withdrawn money from their savings or deposit accounts to help fund their businesses over the past six months. This was because they were turned down for credit by banks, or the interest rate to be charged on the loan they had secured was too high.
The average amount of money they have withdrawn for this purpose is £91,310 each, or £2.83bn collectively.
Research by Investec among some of Britain’s most successful entrepreneurs reveals that over the next 12 months, 60% expect access to capital to be ‘very hard’ or ‘quite hard’.
Linda McBain, head of banking and treasury, Investec Bank, said: “Some businesses finding it difficult to secure capital are clearly turning to their savings to fund their enterprises. However, with interest rates on deposits so low, there is often little incentive to keep money in accounts. Our research shows that the average interest rate from a business deposit account on a balance of £50,000 is 0.67% gross AER [annual equivalent rate], with just under 17% of banks paying less than 0.1%.”