Rural businesses “more likely” to use personal finance than urban counterparts, study reveals

More than four in 10 businesses in the UK now use external finance to support growth and investment plans, a major study has revealed.

But finance options for rural business owners are still limited, resulting in slower growth compared to urban peers.

The findings form part of the first annual Regions and Nations Tracker, published by the British Business Bank (BBB).

According to the report, more than 40 per cent of firms used external finance – such as overdrafts, loans, credits cards, and equity finance – in 2021.

However, London, the South East, the North West and the East of England accounted for 86 per cent of equity investment and 69 per cent of private debt investment, despite representing just 55 per cent of enterprises in the UK.

Rather than a lack of high-growth rural businesses, the disparity is attributed to patterns of investor behaviour. For example, lenders are “far more likely” to invest in businesses close to their office; 82 per cent of all deals involved investors less than two hours away from the business, and in over half of cases, less than half an hour from the business.

As a result, rural business owners are more likely to use personal funds to grow their businesses – a risky approach that may not cover all of the funds required and could put personal assets – such as property – on the line.

The BBB said the tracker reveals regional disparities in access to equity finance and private debt.

“The lower flows of finance in certain regions and localities reflect a population of businesses operating with fewer choices. These gaps in growth finance are undoubtedly holding back ambitious entrepreneurs and lead to wasted economic potential. This is something the British Business Bank is committed to changing,” said CEO Catherine Lewis La Torre.

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