According to the survey of 850 SME owners/decision makers, catering SMEs are most likely to struggle with funding issues when starting up their business, with over half (52%) saying they had difficulties.
However the research does show catering SMEs anticipated needing slightly more to start their own business then they actually needed, around £48,990, but actually received £43,608 on average. This was significantly more than the cross-industry average around the UK, with most sectors needing an injection of £27,520 to set up.
Catering SMEs mostly borrowed from the bank to generate this amount (50%), however nearly half borrowed from friends and family or used their savings (44%).
Despite needing a generous amount to start up, it seems catering businesses are relatively low-cost to maintain or grow, with £3,413 being the average amount borrowed in the past 12 months. This figure was one of the lowest compared to other industries, along with design and marketing and communication SMEs. The national average was a significant £75,408 lending in a 12 month period.
The biggest reason cited for borrowing this amount were to expand the business (71%).
Nearly half of catering SMEs have gone without pay due to cash flow issues (44%), and not surprisingly, over half (52%) say customer service has played the biggest role in the success of their business.
The research also highlights which UK regions are leading the way in their sectors (see map above). Of the cities surveyed, Liverpool is an education and engineering leader with 12% of start-ups in these sectors, whereas Southampton comes top for IT (18%), Edinburgh leads for Finance (10%) and Newcastle for Education (16%). Cardiff leads the way in manufacturing with 18% of its SMEs focused on manufacturing. Arts and culture is flourishing in Bristol (10%) and professional services is big business in London (17%)
Peter Alderson, Managing Director at LDF, commented: “Over 99%* of private sector firms in the UK are made up by small to medium-sized businesses and whilst this sector is clearly thriving, our survey sheds light on the harsh financial realities faced by start-ups and established businesses alike.
“With over half of SMEs (52%) stating that they do not find banks to be business friendly, many experts cite that small to medium-sized business owners are instead turning to alternative finance options as it helps people spread the cost of business investment and expenditure.”