Earlier this year, a milestone was achieved by the UK government as it handed out the 100,000th start-up loan to a small business. This brought the amount given to small businesses to £941 million overall. For those who are creating a business, loans like this can be the difference in those difficult early stages, especially with the current financial climate, which is taking its toll on big and small businesses alike.
The British Business Bank Loan
The company that received the 100,000th loan was the St Albans-based noodle shop Ramen Electra. The loan specifically targets ethnic minority businesses, including Asian, Black, female and young business leaders. It was started by the British Business Bank with the goal of providing not only financial support but guidance and advice to these entrepreneurs who are attempting to navigate the market.
Out of those 100,000 loans given so far, 40% have gone to women and one-in-five minorities. Young people have also received 14% of the loans, with the top five local authorities – by loan volume and value – being Birmingham, Cornwall, Hackney, Manchester and Leeds.
The loans have helped the total economic activity to reach £5.3 billion in the UK, and, in the business minister Kevin Holllinrake’s view, they are doing an excellent job in creating growth, opportunities, and “making dreams a reality”.
How Does This Funding Help Business Entrepreneurs?
As mentioned previously, the UK government’s loan is not just about handing out a large portion of finances, it is about nurturing small businesses and providing the support, encouragement and guidance that is needed in such a competitive market. Although some sectors of the UK, such as the automobile industry is on the up, others are still struggling. At the beginning of a business journey – especially as a first-time, budding entrepreneur – navigating those struggling markets can be exceedingly difficult.
Oftentimes, while entrepreneurs can be adept at creating a business idea, putting it into motion and dealing with the more intricate side of the business can provide an unassailable hurdle.
In the UK alone, it is estimated that nearly 60% of small businesses fail in their first three years. In fact, in 2021, between 9% to 18% of companies were incorporated and then dissolved within 24 months, with a further 30% to 40% being dissolved within 36 months.
Overall, that year also saw a giant jump in total business closures, with a huge 111,145 closures happening in quarter one alone. These statistics show the need for both an adequate amount of finances to start up the business, but also – and, perhaps most importantly – the business acumen that is required to survive the more difficult climate that businesses are facing right now.
With the UK government’s loan, a new business can receive that financial crutch, as well as the appropriate support to get through those crucial first steps.
What Are The Most Common Causes Of Failure?
Despite the fact that the current financial market is not exactly nurturing for new businesses, ordinarily, most businesses fail for one reason: poor management. Once again, entrepreneurs might be skilled at formulating business concepts, but not all are effective leaders or business owners.
For this reason, one of the most common reasons for business failure is a lack of research and planning. There are many reasons why research is so important but for any business, it is crucial to know whether there is a market for specific services or products. The size of this market, the lifespan of the customers — how long they will need to buy the products and whether it is possible to gain consistent repeat custom – and the specific purpose of the business must all be looked into.
The budget must also be keenly kept to. Travelling, for instance, is a common part of many businesses, but with many flights in the UK growing more costly, finances must be controlled and looked after as much as possible.
Ineffective marketing is also another big area where new businesses trip up on. Nowadays, there are a number of marketing channels for B2B and B2C companies alike, but not all of them are efficiently utilised. There are many reasons why social media is good for business, but the growth of platforms like Tik Tok has introduced a whole new way to market to customers and build an online community.
One of the issues with new businesses, for instance, is that they are an unknowable entity – a custom brand without a particular distinguishable personality. Utilising a marketing channel like this, however, would strip away the wall and provide transparency between the customer and the business.
Supporting Businesses Of The Future
These are just a couple of reasons why new businesses fail, but with the support of the UK government, pitfalls like these can be avoided. That isn’t to say it would solve all of a business’s problems, but it can provide a backbone that will guide a business from one side of the road to the other.
According to SME Loans, as many as 64% of the British workforce are looking to start their own businesses – with 83% being 18 to 24-year-olds. This is the precise reason why loans like this can be so crucial. Every new business deserves a good shot at making it in the UK market, and with the help of this loan, the challenge does get just a little bit easier.