Just 13% of Startups Looking at Loans

According to the latest research from the UK Startup Awards, ‘bootstrapping’ has emerged as the predominant method of startup funding, with 85% of founders relying on personal capital. This trend not only highlights a departure from traditional funding but also sheds light on the unique challenges British SMEs face when it comes to lending.

Bootstrapping, or self-funding, allows entrepreneurs to maintain full control and ownership of their business while avoiding the potential pitfalls of debt. Professor Dylan Jones-Evans OBE, founder of the UK Startup Awards, said: “By relying on sales rather than external funding for income, bootstrapped businesses will be more customer-focused and have greater freedom to develop without outside interference.

“The study reveals that while 59% of new businesses have one founder, 41% have two or more entrepreneurs involved in starting and managing the business. By gender, 49% of new businesses with more than one founder consist of all-male teams and 36% have mixed-gender teams. Just 15% of team-based ventures are all-female.”

Interestingly, 39% of startup founders had parents who were also entrepreneurs, indicating the significant role of either exposure to entrepreneurial peers or the option of financial assistance from family members. Regionally, entrepreneurs in more affluent areas were more likely to have business-owning parents, suggesting the latter plays a pivotal role.

Somewhat surprisingly, UK Startup Awards' research reveals that over two thirds of all startups have moved away from traditional banks, instead opening accounts with challengers or fintech firms. Starling Bank has emerged as the major market disruptor, attracting 31% of all UK-based founders.

Jones-Evans said: “By being exposed to business concepts from an early age, having co-founders who complement each other and knowledge gained from previous ventures, entrepreneurs are maximising the opportunities for success at a time when there are real economic challenges facing all businesses.

“Startups make an enormous contribution to the UK economy, and the findings of this study should provide insights to help boost support for new firms and accelerate growth and competitiveness in all sectors.”

Despite the impressive resilience demonstrated by startups, the report underscores the need for support. More than half of all new businesses anticipate that they will require some form of support in the next year, with access to finance, marketing support and talent acquisition ranking as the top areas of concern.

Starling Bank CIO Harriet Rees said: “Founders risk a lot to build a successful business from the ground up, and they have to overcome all kinds of hurdles in their first few years of trading. Startups have faced a particularly tough environment in the last few years, first with the pandemic and now with higher interest rates and the uncertainties of the cost of living crisis. Many have demonstrated incredible resilience.

“This report gets to the heart of the entrepreneurial community in the UK. It captures inspirational stories from founders, while also shedding light on what support is needed as their startups evolve – whether that be increasing access to capital, strategic advice or better understanding of business finances.”

The rise of self-funding and the changing dynamics of lending present both challenges and opportunities for SMEs. The insights from the UK Startup Awards’ report provide food for thought on the entrepreneurial experience, highlighting the need for accessible funding and strategic support.

How SMEs Can Find a Business Loan

At BusinessComparison, we provide expert assistance in identifying the most suitable loans for your business. Our comprehensive comparison includes a range of business loans from reputable high-street banks to more specialised, small lenders.

How Startups Can Open a Business Bank Account

Whether you run a startup or part of a well-established business, having a current account is necessary for all registered companies.

A wide array of business account providers offer a range of accounts that feature overdrafts, online account management, and app integration to balance text alerts. Having a business-specific account gives you a clear separation between personal and business finances.

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Sam White