New research from independent provider of SME finance, LDF has revealed that many small to medium businesses are finding it difficult to understand finance terms and jargon which gets in the way of them applying for finance. The research surveyed a sample of 506 SME decision makers in various industries like retail, construction, professional services, administrative services and health.
47.8% of SMEs have been deterred from applying for business finance. 33% did not understand the term CAPEX (capital expenditure) followed by 31.4% not understanding ROCE (return on capital employed) and Ebitda (earnings before interest, tax, depreciation and amortization) at 30.4%.
The more understood terms include HP with only 14.4% not understanding and asset finance at 14.2%.
Peter Alderson, managing director of LDF said: “It’s disappointing, but perhaps not surprising, that nearly half of UK SMEs are put off applying for finance by the terminology used. For many, running a SME is a challenging, all consuming activity, so complicated financial jargon and acronyms are just extra barriers in the way of their success.
“At LDF, we are committed to making not just the terminology of finance, but access to it, as easy, quick and trouble-free as possible.”
Gender, age, location and company size differences
Those most put off by financing terms are in the East region, with 57.1% saying they were. On the other hand, out of those in the South West, 70% said that they were the most comfortable with finance terminology. The top place in the UK is Plymouth, with 90% saying they haven’t been put off by terminology.
Gender, age and the size of a company are also factors that affect the willingness to deal with financial terminology. Overall, women are more likely to be put off by finance terminology than men with 53% saying this in comparison to 44.5% of men.
SMEs with only 50-99 employees are the most likely to find terminology off-putting at 56.8%. Those with smaller workforces are less likely to be intimidated by terminology, with only 32.4% of firms with up to nine employees saying this and 35.3% of companies with between 10-49 workers.
When it comes to age, those over the age of 55 are the least likely to be put off by terminology (21%). 58.2% of those in the 25-34 age bracket said they were put off. Surprisingly, the second group least likely to be intimidated by jargon are the 16-24 year olds, at 45.9%.
Alderson added: “The point at which a larger number of SME owners are suddenly put off by business and finance technology is an interesting one.
“There seems to be a tipping point, at which the companies really start to grow, and there is often a need for additional finance, but the language used doesn’t encourage people to apply, potentially hindering their expansion.”
Have you ever been put off by business jargon? Has it ever held your company back? Let us know your thoughts in the comments.