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“SME growth is the bedrock for future economic development in Northern Ireland but educating start-ups about alternative forms of funding is essential for success”

So says Professor Mark Durkin, co-author of a new study which examines the relationships between traditional lending banks and SMEs and explores the impact of crowdfunding as an alternative source of finance for start-ups.

Funded by the UK’s Institute for Small Business and Entrepreneurship the study entitled “The SME-Bank Relationship: Exploring the Impact of Crowdfunding at Start-up” was undertaken by a research team led by Ulster University Business School and included the London Institute of Banking and Kent Business School.

Fourteen small businesses throughout the UK were interviewed to ascertain how they used crowdfunding to grow their businesses.  In addition, 13 senior lenders in the main banks throughout the UK were contacted to see the extent to which they saw crowdfunding as an opportunity or threat to their existing business model.

Lead researcher on the project Professor Mark Durkin commented, “Ulster University Business School has monitored and researched the relationships between small businesses and banks for over 20 years with the outcomes of that work informing both policy and practice.  As we move into a more digitised economy with access to alternative finance and tech-enabled financial solutions the role of crowdfunding for start-ups is becoming increasingly prevalent.  However as businesses move from start-up into growth their financial needs become more complex particularly with regard to international trade and foreign exchange.”

The key findings of the study identify a clear need to improve the education of both the small business community and lending bankers with respect to alternative finance platforms and their operation.  Also recommended is better understanding and clearer signposting of benefits of the wide range of finance platforms available at different stages of small business growth.

Dr Anthony Gandy, co-author of the report, recently appointed Visiting Professor for Ulster University Business School’s Department of Accounting, Finance and Economics and Visiting Professor at the London Institute of Banking and Finance, concluded,

“In short there are clear roles for both banks and the crowdfunding alternative.  The key to success for SMEs is being aware of what finance options are available and the optimum time in the business lifecycle to avail of them.  For banks it is vital that they become more conversant with non-traditional platforms and more aware of the alternative funding landscape generally.  This provision of meaningful advice plays a strong role in the SME-Bank relationship, especially at times where bank networks are contracting.”

The SME – Bank Relationship: Exploring the Impact of Crowdfunding at Start-up