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Alternative finance ‘becoming vital’ for SMEs in north

THE ability for small businesses in Northern Ireland to access alternative forms of finance has become a vital factor in their successful growth, the head of a Belfast accountancy firm insists.

Since the financial crash and credit crunch, the funding void left by traditional lenders has been filled by boutique funders and alternative finance, which can allow SMEs to access finance for a variety of different needs, from long term investment through to funding for short term working capital.

But according to Conor Walls, managing director at Exchange Accountants, the key to small firms securing successful alternative financing is to understand what their requirements are and to know what’s on offer, so that they can secure the best possible deal for their business.

With the continuous improvement in technology and the ever-growing popularity of online banking, banks and building societies have continued to close branches across Northern Ireland, and by the end of 2018 over 43 per cent of bank branches available in 2010 will have shut.

“As a result, businesses have had to adjust to the reality that accessing finance from traditional lenders has become much more difficult, and the ability for SMEs to access finance to grow their business is no longer a simple case of hoping the local bank manager likes the ‘cut of your jib’,” Walls says.

“Businesses can access alternative financing through a range of different forms, but most commonly it is secured via friends and family, peer-to-peer lending, angel investors, venture capital investors, crowd funding, equity finance, invoice financing and asset finance.

“Funders will often have key criteria which must be satisfied before any finance is provided, and borrowers can expect to be required to explain in detail what the growth potential of the business is and how the money is going to be used, as well as showing how they will be able to repay the borrowings and what security the borrowers can offer.”

He added: “The financial world is constantly evolving, and it’s no surprise we’ve seen local businesses embrace alternative finance.

“In recent months we’ve found ourselves working with clients to access alternative finance for a variety of needs, from loans in excess of £100,000 for long term investment through to funding for shorter term working capital requirements”, he added.

Funders will often have key criteria which must be satisfied before any finance is provided, and borrowers can expect to be required to explain in detail what the growth potential of the business is and how the money is going to be used, as well as showing how they will be able to repay the borrowings and what security the borrowers can offer.

Securing alternative finance may appear to be a daunting prospect to the uninitiated, but according to Walls the most important step business owners must take is to educate themselves on the pros and cons of each method of funding and ensure they are as prepared as possible.

He added: “Having a real understanding of what’s on offer is crucial to securing successful alternative financing, and I advise every business owner to ask questions and consider their options.

“We spend a lot of time working with our clients to help them secure the funding that suits their business needs. This ranges from identifying their value proposition, preparing profit and loss and cash flow projections to show funding requirements and, more importantly, the ability to repay any borrowings, through to preparing an application and meeting with a funder on their behalf.

“The key to successfully securing alternative financing is to know what your requirements are and to arm yourself with the knowledge to identify the best possible deal for your business,” he added.

Established in 2011 with officers near Belfast City centre, Exchange Accountants provides a range of accountancy services and tax advice to a wide variety of locally based SMEs and individuals.

The company has developed a specialism in digital and cloud accountancy services and was the first accountancy practice in the north to be recognised as a Gold Partner with market-leading cloud accountancy software provider Xero.

Source: Irish News

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Small-business optimism dips over fears of an economic slowdown

Although tax cuts and regulatory rollbacks this year fueled small-business optimism to hit its highest level in decades , the latest CNBC|SurveyMonkey Small Business Survey, released Monday, reveals that small-business confidence is starting to cool.

After hitting a record high in Q3, the Small Business Confidence index declined from 62 to 59 in the fourth quarter, led by small moves lower in components across the board. This new data from CNBC and SurveyMonkey underscores the idea that while sentiment is at or near record highs, challenges still remain for Main Street.

The CNBC/SurveyMonkey Small Business Survey, conducted from Nov. 19–29, polled more than 2,100 small-business owners.

The dip in the CNBC/SurveyMonkey Small Business Survey comes at a time when the markets are punctuated by bouts of volatility and economic concerns loom over trade tensions and the shortage of skilled workers. The data supports other small declines in metrics, from the National Federation of Independent Business’s monthly read on small-business sentiment in September and October, as well as trends around hiring and labor from Bank of America and Wells Fargo.

“Unemployment is down, small businesses are growing, but there are still some very troubling trends,” said Todd McCracken, president of the National Small Business Association, in an email to CNBC. “The rate of small-business start-ups and small-business hiring continues to lag, one-quarter of small firms still cannot get the financing they need, and few can afford a good health insurance plan.”

He added that “economic security is a huge drive in how small businesses are faring — they’re less likely to invest, grow, innovate and so on if they fear economic problems on the horizon.”

McCracken pointed to polling from the group’s membership, which also saw a decline in economic outlook midyear in 2018.

For the first time in six quarters, sentiment around business conditions also has taken a slight dip, from 58 percent in Q3 to 55 percent in Q4, although that read is still up 11 percentage points year-over-year, according to the survey.

Positive outlook on tax policy waning
Just 34 percent of small-business owners now say that tax-policy changes will have a positive effect for them in the next 12 months, down from a high of 46 percent kicking off the year, indicating some of the positive sentiment surrounding the law may have waned.

Weighing in on the latest results, Laura Wronski, senior research scientist at SurveyMonkey, said, “I would describe it as a slip, not a fall. It’s not a huge drop, and still up year-over-year.”

She added: “Hiring expectations are about the same, but some of the improvements we saw with changes to tax and trade policy were not sustained throughout the course of the year.”

More small-business owners are questioning the positives the administration’s trade policies will have on their bottom lines. Sixteen percent of small-business owners say they expect changes in trade policy will have a positive effect on their businesses in the next 12 months, a new low for the survey. What’s more, 1 in 5 business owners surveyed do business with China, and they were nearly twice as likely as others to expect a negative impact on their business.

 

Skilled-labor shortage still a top concern
On the job market, 18 percent of business owners said they had roles open for at least three months, an increase of 2 percent from Q3 of this year. To help bridge that gap, 56 percent said they were offering higher wages, 31 percent said they were offering to pay for additional training and 27 percent said they were offering additional benefits to workers. Others said they were offering to help pay for student loans and even relaxing policies around things like drug testing and criminal records.

“I think it’s very interesting that even small-business owners are having to juice their offers a bit because it is a tight hiring market,” Wronksi said. “It’s great for workers but tough on small-business owners.”

Finding skilled labor has also come up as a top issue in the National Federation of Independent Business’ monthly survey, outpacing other major issues, like taxes and government red tape and regulations for more than half of the year in 2018, a trend that could continue into the next year.

Source: Yahoo Finance UK