UK SMEs are dependent on credit cards due to limited access to finance.
Small and medium enterprises (SMEs) in the UK are increasingly turning to credit cards as a financing option.
This trend poses challenges for the UK economy, as SMEs are critical to driving innovation, jobs and regional growth, the article said. CityAM By Rob Burlison, Director of Global Corporate Affairs at Intuit Quickbooks.
The report, developed with economist Ufuk Akigitte, shows that SMEs are struggling to grow, create jobs and invest in the future.
Limited access to finance is a major challenge as this has a significant impact on the economy, affecting innovation, employment and overall recovery.
“Collaboration among key leaders is essential to provide resources, share knowledge, and develop policies that help small businesses overcome barriers and achieve sustainable growth,” Bullison said.
With UK employment falling for two consecutive years, businesses face increasing challenges in securing credit, a key driver of job growth.
Despite these problems, some sectors such as construction and professional services have increased jobs. Wales, for example, saw a modest increase of 400 jobs.
SMEs are said to play a vital role in UK economic activity, and access to digital tools, trusted advisors and alternative financing options can help business owners overcome these barriers.
In the year By 2024, 27% of small businesses will use credit cards to fund operations, with 33% charging more than 25% of their monthly expenses on their cards.
While credit cards offer access and flexibility, their high interest rates drain wealth, limiting investment for long-term growth.
In addition, banks are becoming more selective in their long-term loans to small businesses amid rising interest rates and tighter monetary policies. This change leaves SMEs with fewer options, allowing them to rely on more expensive debt or postpone important investments.
The report also highlights the impact of financial institutions’ ‘income gap’ on the performance of micro and small enterprises.
Banks with higher income differential scores offered more access to credit card financing, allowing businesses to hire and grow. On the other hand, banks with low income disparity have been able to hinder the development of SMEs by limiting the availability of finance.
“UK SMEs turn to credit cards due to limited access to finance” originally created and published by Rental lifeA trademark owned by GlobalData.
