The recent report, from Albion Ventures, found that younger entrepreneurs are almost twice as confident about their company’s growth prospects, when compared to older business owners. 14 per cent of entrepreneurs aged 35 and under said they expected to witness growth over the next two years, compared to only 8 per cent of business owners aged 45 to 54. However, despite high levels of confidence, many young entrepreneurs are being held back by a lack of available finance.
Access to finance
Access to finance is one of the main barriers holding younger entrepreneurs back from growing their businesses. 29 per cent of entrepreneurs under the age of 35 said they had attempted to raise external finance in the past 12 months, compared to 14 per cent of older respondents. Interestingly the older generation were five times more likely to have their finance application accepted compared to their younger counterparts.
As a result of being unable to access traditional finance, younger business owners are taking greater risks to fund their growth. 23 per cent cited using a credit card to fund their business, compared to just 5 per cent of older respondents, and 15 per cent had mortgaged their property for funds, compared to 7 per cent of their older counterparts.
Alternative business finance options
Luckily, for those who have struggled to access traditional finance, there are a number of different alternative business finance options available. Confidence in these options is now starting to grow, as Carl D’Ammassa, director of business finance at Aldermore, commented:
“During the downturn, SMEs saw their funding lines removed or they were declined for new lending, eroding trust in the lenders they had relied on. Understandably this made them wary about using external finance, a distrust they are only now overcoming.”
Investing in growth
Investing in growth was highlighted as one of the main reasons young entrepreneurs were seeking finance. The report found that younger entrepreneurs are more prepared to make an investment in their business, with 14 per cent planning to invest in research and development, compared to just 5 per cent of older respondents.
In addition to this, younger business owners are much more likely to hire new staff than older generations, with 13 per cent planning to grow their teams in the near future, compared to 3 per cent of older entrepreneurs.
Finally, 13 per cent of younger business owners were planning investment to facilitate a change in ownership, compared to 6 per cent of their older counterparts.
Other barriers to growth
As well as access to finance, younger entrepreneurs are facing a number of other barriers that are holding them back from achieving their desired growth.
While younger entrepreneurs are more likely to hire new staff, they cited skills shortages as a common issue they faced. This is an issue that many small business owners struggle with, with more than two thirds saying they feel applicants don’t have the skills they need, according to a separate report.
Management expertise is another barrier to growth that has become more important, especially for younger entrepreneurs, with 24 per cent citing lack of business mentoring as a major concern, compared to only 9 per cent of older respondents.
Patrick Reeve, managing partner at Albion Ventures, who commissioned the report, commented: “The younger generation is by far the most optimistic and ambitious about the future. This pro-growth sentiment is excellent news for the UK economy as the under-35s will become increasingly influential over the years to come.
"That younger entrepreneurs are honest about their skills shortages and are in most need of mentoring is a call of help that we shouldn’t ignore as it’s in our collective interests to encourage their long-term success.”
At Aldermore, we’ve developed a range of finance products that are designed to help growing businesses, including invoice finance and asset finance. To see how Aldermore’s finance options could help your business grow, get in touch with the team today.
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