Expert comment – ‘Small businesses struggling to raise finance’

Dr Luca Cacciolatti, Lecturer in Marketing and Value Chain Management, Kent Business School, University of Kent comments on the following BBC news item:

‘Small businesses struggling to raise finance’

A recent survey conducted by FSB (the Federation of Small Businesses) [BBC article] presented astonishing findings indicating that banks let down small businesses who want to access finance, hampering their growth. Existing theory on SMEs (small and medium sized enterprises) acknowledges the restriction in resources that small businesses have to operate with. SMEs are characterised by little financial capital, limited marketing expertise and little labour availability. ‘Damn. I always have to do everything on my own!’ – would say a small business owner.

Although the banking system might sometimes fail (unjustly) to fund SMEs activities aimed to grow the firm, current research [KAR] indicates not all SMEs have the same chances of growth because of their intrinsic natures. Also, from the article it was unclear whether the 42% of respondents that claimed they were refused access to funding were, in fact, meeting the banks funding criteria. Not all businesses that apply for loans are able to keep up with the repayment and not all businesses can provide such solid guarantees for the bank to fund their activities. ‘Blimey. There is an element of risk here!’ – would say a bank manager.

What I personally found striking in the article I read was certainly the focus on the need for boosting SMEs activities with financial capital injection. Although I recognise in some cases access to funds might be necessary, in many cases I personally believe the booster should come from an improvement of SMEs marketing and the creation of the SME value chain. Do SMEs focus their efforts on the right customers? Do they really know their customers? And do they target the right people with the right value propositions? Ulla, in a famous musical, taught us: ‘If you got it, flaunt it!’. But, what if we (they) have not got it yet?

As we previously stated, SMEs are characterised by financial limitations and little available labour, but also and perhaps mostly by the lack of marketing expertise. This is particularly important when a firm wants to capitalise on a better understanding of their consumers’ needs and wants. A better focus on the access to marketing expertise and marketing information rather than loans, might be for some SMEs a much more viable solution than investing time at queuing in banks, which require the firm to meet very tight funds eligibility criteria.

The French sociologist Foucault maintained the view that power comes from knowledge, yet we all focus on searching for money rather than searching for useful information.

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