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Lack of available funding holds back a fifth of UK SMEs

Nearly a fifth (19%) of UK SMEs have missed a new opportunity in the past 12 months due to a lack of available funding, according to SME specialist bank Aldermore

The bank’s latest Future Attitudes study shows medium-sized businesses are worst hit, with over a quarter (28%) saying they have been affected.

The report, which surveyed over a thousand business decision-makers across the UK, found that those impacted are missing out on income worth an average of £76,888 each year.

Regionally, businesses based in London are losing out on the most additional income due to missed business opportunities, £135,791 on average annually.

This is followed by those based in Wales, Scotland and Northern Ireland (£67,380 per year).

Lack of funding poses problems for those SMEs focusing on scaling up. Achieving growth is the top business objective for almost two fifths (37%) of SMEs, while almost a quarter (24%) are prioritising developing and expanding their products and services. Additionally, just over a fifth (21%) are concentrating on expanding in the UK.

Furthermore, business owners are apprehensive about not being able to innovate and grow.

A quarter (25%) of SMEs state that cash flow is their biggest business concern over the next 12 months.

Moreover, one in 10 (12%) feel keeping up with new technology is their main worry, while a sixth (15%) are anxious about attracting, retaining or upskilling staff.

Tim Boag, group managing director, business finance at Aldermore, said: “It’s concerning to see that almost a fifth of SMEs are missing out on opportunities as a result of financing issues. Small businesses need adequate cash to innovate, grow and keep up to date with the latest developments.

“That’s why it’s important that lenders understand and are responsive to the needs of SMEs.

“By providing specific solutions in a timely way, which meet business needs, we can start to address this problem and ensure SMEs – the lifeblood of our economy – continue to thrive in uncertain times.”

Written by Tom Seymour

Source: Asset Finance International

SMEs funding
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SMEs are shunning traditional banks

ThinCats, the leading fintech lender to mid-sized SMEs, has today published new research highlighting a growing lending divide as younger, modern businesses move away from traditional lenders towards alternative finance providers.

For businesses less than ten years old, 32% call on their bank as the lender of first choice compared to seven-in-ten (71%) businesses over 35-years old. The younger businesses were also more likely to pick an alternative finance platform with more than one-in-five (23%) compared to 4% of the oldest SMEs.

Likewise, in businesses where decision makers were aged under 35, two-thirds (65%) said a traditional bank was not their first port of call for funding. This is in contrast to businesses with decision makers aged 55 and over, where it was just under one-third (30%). For these groups (under 35 decision makers) 22% said they would choose an alternative finance platform, while only 6% (over 55) said they would consider the option.

Sectors such as IT, telecoms and marketing, which are traditionally knowledge or service-based are those leading the way in moving towards alternative finance providers.

Damon Walford, Chief Development Officer, ThinCats, “The SME lending ecosystem is complicated. Changes in the economy, technology and how people work mean that traditional lending models are not meeting the needs of the modern economy by excluding thousands of SMEs from potential funding. Thankfully, it’s encouraging to see that smart minded entrepreneurs are switching to the growing number of non-bank lending alternatives.”

Traditionally, high-street bank lending focuses on asset-backed financing that requires SMEs to provide a physical asset (such as equipment or property) as collateral for a bank loan. Yet, for thousands of service-based companies with few tangible assets, traditional banking credit models often overlook the wider value of a business including the cash being generated.

The research, which surveyed 512 UK SMEs with between 10 and 249 employees, also shows 30% of SMEs who were rejected by their first-choice lender, stopped searching for external funding altogether. This suggests that many businesses, of whom 55% said high street banks were the first lender approached, are potentially giving up when there are suitable alternatives available.

Positively, appetite for lending remains high with more than a quarter of businesses (27%) saying they applied for funding within the last year.

Walford added, “Cashflow lending is a solution for thousands of SMEs, where lenders look at the underlying cash flow generated by the business. For businesses who are service-focused like IT, telecoms and marketing companies it works perfectly. We’ve found that many of these businesses are also more willing to share their accounting data, opening them up to financial providers beyond their banks.

“I hope this message gets out to more SMEs and would encourage them to plug into the growing network of accountants and commercial finance advisers now advising on alternative finance options. It’s critical that UK entrepreneurs can access modern funding solutions for a modern economy.”

BY PETER SMYTH

Source: London Loves Business

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UK small businesses call for emergency budget for no-deal Brexit

The UK’s Federation of Small Businesses has called for Chancellor Sajid Javid to propose an emergency budget to counter the threat of a no-deal Brexit.

The FSB, one of the largest business groups in Britain, said on Tuesday the Treasury must prepare as the pound continues to fall and a no-deal looms.

It demanded a blanket cut of employer national insurance contributions from 13.8% to 12%. The reduction in employer NICs would save businesses £11bn, which would help them mitigate the surge in staffing costs, the FSB claimed.

The group also recommended an uprating of the £3,000 employment allowance, an extension of the HMRC’s flexible payment plans and leniency reserved for firms in financial distress, to the wider small business community.

It argued that doing so will allow small firms time to prepare for potential changes to trading arrangements and economic conditions.

Other recommendations include reducing the VAT rate to 17.5% from 20%, increasing VAT turnover threshold and providing small businesses Brexit vouchers of £3,000 to assist with planning, accessing new markets, retraining staff and retooling.

The government has already set aside about £6bn for no-deal preparations, with £108m for supporting small businesses.

The FSB had previously recommended that the prime minister look to include a statutory sick pay rebate and a modernisation of business rates.

“With the UK set to leave the EU on 31 October, we need an emergency budget before Brexit happens. It’s time for this government to get serious about planning, and preparing the economy,” said Martin McTague, FSB’s policy and advocacy chairman.

He said ad campaigns and small measures focused on a few exporters won’t work.

“Cash is king for small firms, so we urgently need measures that will allow them to sure-up balance sheets, keep hiring, and help them prepare for an uncertain future.

“We’ve been dogged by disappointing economic growth for years … we need interventions on the domestic front. Making business rates fairer, supporting those struggling with employment costs, and investing in infrastructure would give small firms a new lease of life.”

Labour’s shadow minister for small businesses Bill Esterson told Yahoo Finance UK that “no-deal would cause our economy to plunge off a cliff and threaten the livelihoods of millions of small business owners and staff.”

He added the priority must be “to stop the disaster of no-deal.”

Best for Britain, a pro-EU group, said FSB’s call for emergency budget shows the “immense pressure” businesses are put under by Brexit.

Chief executive Naomi Smith told Yahoo Finance UK: “Despite Leave campaigners promising Brexit will be the end of bureaucracy, it’s clear that leaving the EU will tie-up businesses in red tape. Businesses around the country are warning they may have to relocate because of this disastrous process. It’s time to stop the rot.”

Yahoo Finance UK has approached the Treasury for a comment.

By Ben Gartside

Source: Yahoo News UK

SMALL BUSINESSES FINANCING SME lending
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SME lending hits 2-year high – bullish approach essential to Brexit survival

So says Angus Dent, CEO of ArchOver, following the news that the Bank of England has announced that UK SME lending hit a two-year high in June, despite Brexit uncertainty continuing to escalate.

Dent explained to IFA Magazine why we shouldn’t be surprised to see SME lending go up amidst this uncertainty, and why the FS market needs to follow suit and support UK business.

“The message here is that business must continue as usual, regardless of the Westminster-Brussels psychodrama. Businesses still need cash to invest. New projects still need to launched and new customers still have to be served. The SME market in this country is still pushing for growth, however incompetent its political leaders.

“We shouldn’t be surprised to see business lending at a two-year high. Good debt is good for business. Injecting cash into stable companies is the foundation of economic growth – we need to see more of this bullish approach from business as we approach October 31st. We need to see companies taking control of their own futures with sustainable growth finance – not emulating our perpetually dithering government.

“The question is whether the UK’s financiers will support them. The banks have been routinely turning down smaller companies’ loan requests for years now. They may have low-cost capital in spades, but they’re not letting British SMEs put it to work. Instead, businesses need to look beyond the high street and seek out alternative finance that will treat them with the respect they deserve. SMEs need personalised, flexible finance if they’re to make it through the next six months in one piece.

“It’s good to see our small businesses taking this challenge head on. Now we need to see the financiers following suit.”

BY ANDREW SULLIVAN

Source: IFA Magazine