Fear of debt keeps SMEs away from borrowing Almost two-thirds of the 1,960 small business managers or owners quizzed by YouGov cited debt and the state of the economy as the main reasons for staying out of the market for the past two years. Other reasons were high interest rates, the hassle of setting up a new borrowing facility, terms and conditions tied to the deal and security demands from the bank. One-in-three looked outside the traditional lending institutions in the search for finance. One-in-five of them secured backing from business angels or private investors, Government or private sector loans or crowd funding. Leasing or hire purchase agreements, secured venture capital or funds provided by owners and directors were other sources of finance. Simon Mottram, YouGov director of financial and professional services, feels the survey results do not provide a simple answer to whether the banks are hampering SME lending and limiting growth. He said: "Our research suggests it is more nuanced than a simple 'yes/no" answer. Many businesses don't apply for additional finance because they do not want to take on debt in times of economic uncertainty. However, the banks are often behind the secondary reasons for not borrowing more. The survey also shows an increasing number of SME owners are running the business through their own bank accounts, while a minority use a mixture of business and personal accounts. One-man bands and newly established SMEs are the most likely to have personal relationships with their banks, while bigger businesses are more likely to use business accounts. Mr Mottram said the large numbers of SMEs getting finance from non-bank sources could be a reflection of the difficulty of borrowing from their usual sources. But the perceived failure of two initiatives aimed at encouraging borrowing, Project Merlin and suspicion about the Funding for Lending scheme, could mean that banks trying to lend might be focusing in the wrong area.