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In these times of high interest rates, a bridging loan is a good option

Mike Collins Mortgage Expert and independent financial advisor, explains what Bridging Loans are and how they could be used in current times. Bridging loans offer interest-only loans. They are typically taken out for people who need funds quickly. It is basically a bridge that allows for credit to become available between incoming debt and existing credit.

If you are in need of a quick-term lifeline, it can help you purchase property directly or at auction, complete renovations, and do any other work that is needed.

Mike Collins Mortgage expert, an experienced financial planner, shared his 17-year experience. Homebuyers are losing two out of five property purchases due mortgage delays. It is crucial that they can move quickly – and they have the option to do that using a bridging loan.

“The simple answer to this question is that a loan bridging a gap is paid back in a short time, which allows the interest to be more easily managed and makes the loan more affordable. Below are some details about bridging lenders and the reasons they can be helpful in this current economic climate.

Rates for Bridging Loan Interest
These can be fixed. Stability can be achieved if you can pay the agreed-upon repayments. Variable interest rates will change in accordance to the Bank of England Base Rate, which currently stands at 2.25% (Sept.2022).

The rate you pay will determine the amount of your monthly repayments.

Rates can vary depending upon what you want to use the loan for. Bridging loans on land or business bridging loan rates are generally more expensive than one for residential purchases.

Buyer demand for homes is very high. This increases the demand for bridging loans and delays in the purchasing process.

It is important that you realize that interest rates are charged on a monthly schedule when looking at them. This is because terms usually last only 9-12months.

Cash available quickly
Bridging loans, which are easier to arrange than secured or mortgage-type loans, are more efficient if time is of the essence.

Funds can often be released in just three days. Bridging loans are a great alternative to the competition.

It is quicker to arrange because the lending decision tends depend on your exit strategies. The strategy you have for paying the loan back at the end of the term.

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If you have bad credit, it is possible to get one
Your credit score is an important factor in determining whether you are eligible for a loan. It can also affect the rate of interest or other fees you may have to pay.

Even if you have bad credit, it’s possible to get one. The lenders will tend to be more concerned with the property than your credit score when determining the rate.

There are no long checks because the loan is secured against assets of value.

Help to fix broken chains
Recent research found that 1/5 applicants needed a Bridging Loan because they were part a chain that was broken. This delayed their purchasing timeline and made it necessary to get a short-term loan to cover the gap.

Bridging loans could be a way to still make a sale. Currently, the average completion time takes four months.

The current rise in interest rates may lead to a fall in buyer demand. Bridging loans could also be affected by this drop. But loans like this could be lifelines to many buyers, property owners, and others.

Whatever bridging lender you choose make sure they’re a member the Financial Conduct Authority. This means that any complaints, especially when it concerns large sums of cash, can be handled according to FCA guidelines.

By ELLIOT PREECE

Source: News Anyway

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Keeping it in the family? SMEs divided on working with relatives

SME owners are split on whether to keep their businesses as a family affair or not, according to new research by small business lender iwoca. Just two in five (41%) SME owners say they would give a job to a family member if they asked – by contrast, nearly one in three (30%) said they would not employ a relative.

This split reflects current small business arrangements – just over half (54%) of small business owners say they do not work with family in any capacity. Of those who do work with family, one in four (26%) small business owners works with their partner and one in twelve (8%) works with their child.

Steptoe and Son or Succession?

Those who choose not to work with family are clear on why: two in five (39%) small business owners report wanting to keep family and business life separate. One in ten (11%) say they want their family to forge their own path – indeed, more than a third (35%) of SME owners surveyed say it is unlikely that their children would join their business. Interestingly, a tenth (10%) believe their relatives can find a better career outside of their industry.

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Improving family bonds

Despite a minority of SME owners employing relatives, those who do work with family members see it as a positive. Almost two thirds (64%) of SMEs report that working with their relatives had a positive impact upon their relationships, with only a small fraction (7%) of SME owners reporting a negative impact.

Those small business owners who do work with their family cite trust as a significant positive, with a quarter (25%) saying that they trust family members to do a better job than a stranger.

Seema Desai, COO at iwoca added: “For some, working with family members could be one of the best decisions they ever make, but, of course, it won’t work for all. Try to make an objective assessment about what your family member can add that is currently lacking in your business, and whether you could both maintain the right guardrails to protect both your professional relationship and your personal one. Clear roles and responsibilities will be crucial as you look to grow and build a successful venture in the future together.”

Lottie Whyte is co-founder and CEO of MyoMaster, which she set up with her husband, Joe. She says: “I co-founded a business with my husband Joe three years ago, and for the most part it works incredibly well. There are three key reasons for this, the first is commitment – the work is all consuming and if I’d been married to someone who wasn’t in the business with me I’m pretty sure I’d be divorced by now! The second, trust, is vital and it’s great being able to start with a foundation already so strong. And finally, speed – being able to skip the pleasantries and communicate efficiently has been crucial.

“There can be drawbacks of course, from never being able to switch off from work and the constant pressure to build our global business can sometimes spill over into our personal relationship in a negative way. But overall, my husband and I already have a long history of working well together, from organising our three day wedding to managing house renovations – we know how the other one works.”

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More than 3 million of UK SMEs are unable to grow without funding

The majority of small and medium-sized enterprises (SMEs) in the UK require funding to overcome cashflow issues and pursue their growth plans, new research from Channel Capital (Channel) has found.

The UK-based, FCA-regulated asset manager commissioned a survey of 506 senior leaders within UK SMEs. It found that 59% of businesses currently need funding to ease day-to-day cashflow issues – that equates to 3.29 million SMEs, while more than two-thirds (68% or 3.80 million) need funding to grow.

There are 5.6 million SMEs in the UK, accounting for 99.9% of the business population as well as three fifths of the employment and around half of turnover in the UK private sector.

Despite the demand for an injection of capital, Channel’s research showed that SMEs are struggling to find suitable lenders. Just 51% said it is ‘easy’ or ‘very easy’ to find an SME loan.

Just over half (54%) of UK SMEs think big banks are too slow in assessing business loan applications, with 47% saying high street banks are reticent to lend to smaller businesses.

Almost two in three (65%) respondents said they are open to using alternate lenders for SME finance options, compared to 31% who said they would only trust a high street bank for a business loan.

Elsewhere, Channel’s study revealed that, of those SMEs which have applied for a business loan in the past, a fifth (20%) thought the process was ‘difficult’ or ‘very difficult’.

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Walter Gontarek, CEO of Channel, said, “From Brexit to the pandemic; the cost-of-living crisis to government fiscal U-turns, the past five years have been hugely challenging for SMEs – and financial planning is extremely difficult in the face of so much political and economic uncertainty, as our research has shown.

“Millions of SMEs need funding to soothe cashflow headaches or, crucially, to pursue growth strategies. Yet unfortunately, accessing that finance is notoriously difficult. Our study highlights the poor experience SMEs often have with big banks’ reluctance to lend, not to mention complex and time-consuming application processes with no guarantee of approval.”

Ion Fratiloiu, CCO of Channel, added, “Accounting for three-fifths of employment and half the turnover in the UK private sector, we must better support SMEs with easier access to finance.

“The SME loan market needs to undergo the same level of disruption as consumer loans have, with technology-led and online lenders coming to the fore so borrowers can enjoy the benefits of greater choice, speed, and transparency.

“Positively, our research shows SME leaders are open to working with alternate lenders, including digital lenders, so we’re confident that improving access to finance will open up many new opportunities to these businesses.”

Source: London Loves Business

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Frustrated businesses screaming for fresh cash struggle to get bank loans

Three-fifths of small and medium-sized enterprises (SMEs) said that they currently need funding to ease day-to-day cashflow issues, according to research by asset manager Channel Capital out this morning.

However, those businesses increasingly struggling to get loans from high-street banks, the survey found.

And more than two thirds of SMEs reported that they need funding to grow.

With around 5.6m SMEs in the UK, that means that about 3.3m need to access finance to help them stay afloat during an extremely challenging time for businesses, Channel said.

But business owners are facing roadblocks when it comes to receiving loans because of a reluctance among high street banks to lend to smaller firms, the survey found.

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Too slow and reticent
Over half of the more than 500 business leaders surveyed said that they think high-street banks are too slow in assessing business loan applications, and just under half felt that they are reticent to lend to smaller businesses.

It comes as a number of banking giants reiterated that they had strict affordability tests when it comes to lending, but have set aside millions of pounds to deal with potential defaults amid cost-of-living pressures.

NatWest said it was introducing targeted lending packages for the most badly affected sectors, such as farmers who are facing a plethora of cost challenges.

But SMEs said that they are open to using alternative lenders for finance options rather than relying on big banks for loans, Channel’s survey showed.

Walter Gontarek, the chief executive of Channel, said: “From Brexit to the pandemic; the cost-of-living crisis to Government fiscal U-turns, the past five years have been hugely challenging for SMEs – and financial planning is extremely difficult in the face of so much political and economic uncertainty, as our research has shown.

“Millions of SMEs need funding to soothe cashflow headaches or, crucially, to pursue growth strategies.

“Yet unfortunately, accessing that finance is notoriously difficult.

“Our study highlights the poor experience SMEs often have with big banks’ reluctance to lend, not to mention complex and time-consuming application processes with no guarantee of approval.”

The firm added that smaller businesses need to grow to help boost the economy, because they account for a big proportion of the UK’s employment and turnover.

By MICHIEL WILLEMS

Source: City A.M.

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The UK’s small businesses need mentors to navigate the tough times ahead and boost growth

Emma Jones CBE is the founder and chief executive of small business network and business support provider Enterprise Nation.

As we head into the most challenging macroeconomic environment for decades, the UK’s small business community will need careful guidance.

Navigating unimaginable scenarios has become second nature to the nation’s entrepreneurs for all the wrong reasons.

While you might think political ups and downs create that illusive quality ‘resilience’, what has actually happened is that too many founders have simply frozen their plans, like rabbits in the headlights.

If we are going to see growth, we must urgently focus on turning this around. Small businesses are crying out for a fresh approach and a new business action plan that will stand up to whatever the next few years are going to throw at them.

It’s no surprise then, that a recent report has uncovered a ‘pent up’ demand for mentoring in the UK right now.

Mentoring Matters launched today on National Mentoring Day, found that the nation’s appetite for mentoring is on the rise. Today, 82 per cent of businesses are interested in mentoring.

Two thirds (61%) of the 823 small business founders surveyed said that mentoring’s reputation among their peers and business colleagues had increased, with younger founders seeing fewer barriers to being mentored than older entrepreneurs, suggesting there is also a growing role for mentoring to play in the future.

The benefits of mentoring are obvious to most people who have had a mentoring relationship. The survey found 66 per cent of businesses that had received mentoring felt it had helped them survive and three quarters (76%) said it had been key to business growth.

But the report also found too many leaders amongst the country’s 5.5 million small and medium-sized businesses are yet to take part, despite a willing army of potential mentors waiting in the wings.

Put off by time pressures and a perception of an unachievable schedule of long meetings over dusty desks, entrepreneurs have been facing the increasing economic pressures alone for too long.

While taking time out of the business can be challenging, those that are working with a mentor tell us they are finding a way – they are making it work at a frequency and in a manner that suits both the mentor and mentee.

A friendly face on a Zoom after dropping the kids to school is a great way to start the day or a quick call with someone who has ‘been there and done it’ on the commute ahead of a key meeting, really helps to clarify strategy and cement goals.

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The reality is that the experience and wisdom that mentors can bring has never had greater value to our economy as we dive into a new era of book balancing politics under Rishi Sunak.

With a willing army of mentors waiting to be mobilised, we must break down the barriers to ensure more entrepreneurs can access this resource to navigate the tough times ahead.

Mentoring has a very clear role to play in improving business performance and supporting growth. As a founder of a growing company myself, I’ve benefited from having a mentor over the past decade. When there are so many questions to address each day – about product, people, finances and growth – it’s vital to have a sounding board; someone with experience who can hear you out as you navigate the entrepreneurial journey.

Younger entrepreneurs see fewer barriers to being mentored. The under 40s see it as much more achievable than their older colleagues. The report suggested only 38 per cent of businesses founded by the under 40s said cost is a barrier to seeking a mentor, compared to 58 per cent of the over 40s. Half (52 per cent) of the over 40s claimed a lack of time as a barrier, compared to just 40% of under 40s.

Removing these barriers is, at least partly, about addressing perceptions. The report found the financial cost of participation was more frequently cited than any other barrier (51 per cent) – yet most (70 per cent) of the mentoring that respondents received was actually free.

A lack of relevance was also a popular barrier (cited by 45 per cent) but platforms to match mentees to mentors with relevant knowledge of their sector and business issues do exist, for example the support offered to firms on the Help to Grow: Management course.

The report found ethnic minority respondents to the survey saw less barriers to being mentored than their white British counterparts. Only 39 per cent of saw cost as a barrier, and 36% said it was a lack of time that stopped them seeking a mentor. The same figures for white British respondents were 57 per cent and 54 per cent respectively.

Another 38 per cent of ethnic minority respondents said that a perception of mentoring not being relevant to their business is a barrier, compared to 48 per cent of white British respondents, suggesting firms founded by minorities are more open to this kind of support.

The good news is the growing demand is matched with a growing willingness to become a mentor. The report found 83 per cent of business leaders polled were up for it. Now we just need them to get involved and sign up.

They could easily do that via Enterprise Nation and get training from the Association of Business Mentors as part of the Government’s Help to Grow: Management Course, a flagship programme launched by Rishi Sunak last year.

By Emma Jones

Source: This is Money

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Business Loan Requirements: How to Qualify and What is Needed?

No matter what kind of business you run, eventually, you’ll probably need a cash injection to facilitate future operations. To replenish your business capital, you might apply for business loans from a lender. This is a common practice conducted by many enterprise owners every year.

Unfortunately, the loan application procedure can be very frustrating if you don’t know what lenders require. To receive loan approval from some lenders, you must fulfill specific requirements. Understanding these terms as a borrower will help you secure a loan faster and improve cash flow efficiency.

We hope this post will help you understand some basic business loan requirements and conditions. So, let’s start:

The Process Of Qualifying For Business Loans

It may seem intimidating to submit an application for company funding. Understanding the conditions for company loans, which could include excellent personal credit scores, collateral, and a long history of business operations, could speed up the procedure and raise your odds of being qualified for business loans.

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Factors That Lenders Consider For Your Loan Qualification

Depending on the kind of loan you are looking for, your company, and the lender you are collaborating with, you may need to provide specific documents and information. Usually, you can expect to provide the following information in addition to fundamental business information like your tax ID and business industry:

  • Credit score

Owners of businesses must keep an eye on both their personal and corporate credit scores. Since it takes time to establish a credit history for your company, your personal credit score is often more important. When evaluating your loan application, expect lenders to look at your personal credit history. To increase your chances of approval, you might wish to hold off on applying until your credit is in good standing. Additionally, you can ask one of the commercial credit bureaus, such as Bradstreet, for a report on your company’s credit history.

  • Business operational aging

Most lenders like to engage with companies that have been around for a while. They frequently require operations having been established for at least six months to a year, and banks may require two to three years. Since startups have a poor track record of paying back loans, lending to them is regarded as risky. Check the lender’s minimum time in business standards before submitting your application for financing to be sure you fulfill them.

  • Business strategy

A detailed description of your products and services, your costs, and how you make a profit should all be included in your business strategy. The financial sections of your business plan, including the financial statements and balance sheets, are probably of most interest to lenders. However, your business plan as a whole would show lenders that you have good managerial abilities, an understanding of the industry, and the capacity to repay a loan.

  • Balance sheet

Your balance sheet would show the company’s assets, liabilities, and owner equity. The company’s financial situation at any one time could be displayed by compiling this data into a single document.

To determine the company’s value, you would need to subtract your existing liabilities from your current assets. Lenders would use the balance sheet to assess the business’s financial health.

  • History and cash flow projections

The amount of money left over for a business after paying for routine daily expenses is known as free cash flow. Another instrument that lenders use to assess a company’s capacity to pay back debt is a cash flow analysis.

In addition, lenders would be able to determine how much debt your company could bear and how much money would be available to reinvest in your company by breaking out your cash flow history and estimates.

  • Account receivables and payables report

The amount customers owe you for any completed project is known as accounts receivable. On the other hand, accounts payable refers to the unpaid sums you owe to vendors.

The specifics of how your business handles payments and accounts payable demonstrate to a potential lender whether you are well-organized enough to utilize your resources efficiently or not.

  • Collateral

In order to secure a business loan, borrowers might pledge assets as collateral, giving the lender the right to confiscate those assets in the event that the borrower fails to make payments.

Although not all lenders demand collateral, if they do, the loan amount would be based on the asset’s worth. Among acceptable assets are real estate, machinery, bills, and receivables.

Final Thoughts

Before acquiring a loan for your business, make sure to research and compare lenders. Find a lender whose minimum requirements your company can meet and whose terms and conditions you can survive with.

Source: Financial Investor

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More than half of SMEs in UK still struggling post-COVID

New research has revealed that over half of respondent SMEs (56%) are still struggling to stay afloat, two years on from the start of the pandemic. Earlier this year, B2B BNPL provider Hokodo surveyed 500 SMEs across a number of industries to gain a better understanding of how such businesses were recovering from the pandemic, and the results were startling.

The hospitality and tourism industry has been impacted the worst, with 77% of businesses still negatively affected. This news comes amid the cost of living crisis, with energy prices and inflation soaring.

More than two years on from the start of the pandemic, 28% of small business owners admit they are barely breaking even. Meanwhile, a further 48% said that their business is now making revenue, but the financial state of their business has been difficult to manage. During the last six months, 28% have had some difficulties making payments or missed paying invoices from time to time. For 8% of respondents, missed payments have become a regular occurrence.

With around half (56%) of SME owners feeling somewhat positive about the future of their business in the next 12 months, there is some good news to be found in the survey results, but SMEs are still facing significant challenges, with business owners worrying about a number of issues.

  • By far the greatest concern for SME business owners is increasing energy prices, which is currently worrying 49% of respondents.
  • Inflation rates are an issue for 43% of business owners.
  • Cash flow is causing problems for more than a third (39%) of SMEs – over 90% of whom had no cash flow concerns pre-pandemic. A quarter says that cash flow is no longer a problem, but it used to be during the COVID-19 lockdowns.
  • Material costs are affecting 32% of respondents while labour costs are a struggle for 16% of businesses.

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One of the ways that SMEs can alleviate cash flow problems is by having the option to delay payment of their business purchases. 23% of survey respondents admitted that access to longer payment terms is crucial to their company’s survival over the coming 12 months. Meanwhile, 41% actively search for suppliers who offer credit terms, and 15% say that this is an essential requirement when sourcing suppliers.

Perhaps adding to the financial strain is the fact that 45% of businesses occasionally have to grant their own customer payment terms in order to win deals, while 14% have to do this all the time, raising the question of why there has not been more provision made to support the B2B sector in this area.

Richard Thornton, co-founder & co-CEO of Hokodo, comments: “It’s no secret that the last few years have been difficult for businesses globally. But while there is a common perception that the concerns of the pandemic are largely over, it’s important to remember that many SMEs are yet to re-establish their equilibrium.

“With the increasing cost of living, inflation, and pressures of the energy price crisis – something that has been shown to significantly impact hospitality providers – SMEs are in need of greater support. Finding ways to better manage cash flow is at the heart of this, and contemporary trade credit solutions have the potential to provide the answer.”

Source: SME WEB

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UK’s Small Businesses ‘To Be Offered Growth Loans’

Small businesses will be offered new ‘growth loans’ by the government as part of the prime minister’s efforts to get the economy out of the doldrums.

Liz Truss announces in the Mail on Sunday an extension of the government’s Start-Up Loans program – which provides support and funding to new businesses – to cover companies that have been around for five years.

Created to help businesses in their earliest stages, the Start-Up scheme has provided more than 90,000 loans since its inception in June 2012.

Liz Truss announces in the Mail on Sunday an extension of the government’s startup loan program

The loans are subject to a fixed interest rate of six percent, and the program offers support — and discounts on products for businesses — to those who may find it difficult to get money from traditional lenders.

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In her article, Ms. Truss says, “I stand with everyone who takes responsibility and does the right thing, from starting their own business to working hard and striving for a better life for themselves and their families. Our clear plan will help them thrive.

“I know how difficult it is for small businesses. They are the lifeblood of our economy. When small businesses succeed, Britain succeeds too.’

Company Secretary Jacob Rees-Mogg said: ‘Stimulating entrepreneurship and new businesses to thrive is critical to growing the economy and raising living standards’

Company Secretary Jacob Rees-Mogg said: ‘This government is relentlessly focused on boosting growth to create better jobs, raise wages and fund our vital public services such as the NHS.

Encouraging entrepreneurship and new businesses to thrive is critical to economic growth and raising living standards. From a hair salon in Wales to a furniture store in Northern Ireland and a cake seller in the Lake District, the extension of the Start-Up Loans scheme will support these small businesses through this challenging period and position them to grow – creating jobs and opportunities all over the world. the UK.’

By Glen Owen

Source: Whatsnew2day

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Late payments costing UK small businesses £684 million a year

As inflation continues to increase, a new survey has revealed that late payments are costing small businesses £684 million each year. Using analysis from thousands of businesses based on revenue and expenses data, this is due to them being paid 5.8 days late on average.

Prepared by Accenture, with the support of Xero, the global small business platform, these findings underpin a new report: Crunch: Cash Flow challenges facing small businesses, Part II. The report aims to help small businesses and their advisors better understand ‘cash flow red flags’ – the early warning indicators that a small business is heading for cash flow trouble.

The report identified the following cash flow ‘red flags’:

Late payments: Almost half (49%) of invoices issued by small businesses were paid late, with 12% paid more than a month after they were due.
Expenses: Small business expenses rose by 18% in 2021 due to supply chain disruptions, price shocks to commodities like oil, and general inflation – a marked difference to 2020, when expenses actually declined by 1%.
Seasonal slowdowns: Amplified in sectors such as hospitality, where small businesses generate 28% of their annual revenues in summer, compared to 22% of their annual revenues in winter.
Alex von Schirmeister, Xero’s UK Managing Director, said: “Small businesses continue to show huge resilience in the face of soaring costs but our data consistently points to the damage caused by late payments. While it’s positive to see a new energy support package, the new Government must take the right action on this devastating issue.

“This isn’t ‘late payment’, it’s ‘unapproved debt’. It’s time to call it that and tackle it head on. This includes enforcing stricter penalties for the worst offenders, to provide a lifeline to an overlooked majority. Businesses should also look at the digital tools available which can also help with faster payment.”

In a separate Xero study*, 79 per cent of large UK businesses said that without their small business suppliers, their organisations would be more expensive to operate. But despite this acknowledgement, over half (55%) owned up to having paid a small business supplier later than the agreed payment terms in the last 12 months.

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Tackling cash flow ‘red flags’

The report recommends that small firms consider adopting online invoice payment options for faster payment; and work with their accountant to stay on top of government programmes that offer payment plans which help businesses smooth out their expenses.

“Late payments threaten owners’ ability to meet their own obligations – such as rent or wages,” said Rachael Powell, Chief Customer Officer, Xero. “Small firms and policy makers can send a clear message that late payments aren’t acceptable, and come together to develop policies and penalties for those who refuse to take the hint. If small businesses and their advisors can actively look out for these red flags in their financial data, they’ll find it easier to anticipate and avoid cash flow crunches.”

The report, including the insights and analysis contained within it, was prepared using Xero Small Business Insights data, publicly available data, and Accenture estimates for the purpose of informing and developing policies to support small businesses. It follows the launch of Part 1, released at Xerocon London in July.

Source: SME Web

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At least 40,000 UK SMEs expected to lean on finance-providers as costs swell

More than 40,000 UK small and medium-sized enterprises (SMEs) are expected to lean on finance-providers to help stay afloat on the back of current challenges around rising costs, according to new research.

The study from London-based fintech lender Nucleus Commercial Finance (NCF) has found that 15 per cent of firms with 10 to 249 employees expect to need a loan to support the running of their business, although just 1 per cent of sole traders predict having to go down this route.

Three quarters of firms in the 10 to 249 range reported being worried about the prospect of rising business costs over the next 12 months, with 29 per cent of this group saying they are very worried, according to the survey, which between August 10 and 15 polled 512 senior decision-makers at UK SMEs.

Just 38 per cent of businesses surveyed say they are confident about being able to access affordable finance in the next year if needed, falling to less than a quarter of sole traders.

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NCF founder and chief executive Chirag Shah said: “UK SMEs have been through the ringer over the past couple of years. Covid pushed many to the brink, and just as they are getting back on their feet, their costs are rising exponentially… the year ahead could prove to be one of the toughest.

“But businesses are not on their own. Having gone through the challenges of Covid, finance-providers and government must work together to ensure that those lessons are learnt to deliver the necessary support. Doing so means that the UK’s battle-hardened SMEs can lead the recovery on the other side.”

By Emma Newlands

Source: The Scotsman