Barriers faced by SMEs in raising bank finance

David Irwin (Irwin Grayson Associates, Stocksfield, UK)
Jonathan M. Scott (Teesside University Business School, Teesside University Business School, Teesside University, Middlesbrough, UK)

International Journal of Entrepreneurial Behavior & Research

ISSN: 1355-2554

Publication date: 11 May 2010



The purpose of this paper is to use univariate statistical analysis to investigate barriers to raising bank finance faced by UK small and medium‐sized enterprises (SMEs), specifically the impact of personal characteristics (ethnicity, gender and education).


A conceptual model was developed and the results of a telephone survey of 400 SMEs conducted (before the “credit crunch”) by the Barclays Bank small business research team were analysed. The survey was based on a large stratified random sample drawn from the Bank's entire SME population.


It was found that education made little difference to sources of finance, except that those educated to A‐level more frequently used friends and family and remortgaged their homes. However, graduates had the least difficulties raising finance. Though statistically insignificant, women respondents found it easier to raise finance than men. The survey confirmed that – and this finding was statistically significant – ethnic minority businesses, particularly black owner‐managers, had the greatest problem raising finance and hence relied upon “bootstrapping” as a financing strategy.

Practical implications

The study makes an important contribution to filling a research gap, given the critical need of policy‐makers to understand differentials between different types of owner‐managers. It brings new insights into its field – access to finance – and with respect, especially, to marginalised groups.


The paper adopts a different approach than many prior studies, with a large sample and robust analysis, to explore a critical need‐to‐know area in a new way – both for policy‐makers and academics in the field of SME finance.



Irwin, D. and Scott, J. (2010), "Barriers faced by SMEs in raising bank finance", International Journal of Entrepreneurial Behavior & Research, Vol. 16 No. 3, pp. 245-259.

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