sme finance

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

HSBC has confirmed £750m of new funding to support the growth of SMEs in Wales.

The bank has ringfenced the finance for Wales as part of a £15bn commitment to support SMEs across the UK.

It also includes ringfenced funding from businesses trading internationally (£2bn), in the agriculture sector (£1.2bn) the tech sector (£500m) and franchise businesses (£500m).

Since launching a SME fund in 2014, HSBC has lent more than £90bn.

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Peter McIntyre, head of business banking at HSBC UK, said: “SMEs are vital to the UK economy, and our customers have told us they are ready to invest for growth. The £15bn fund will help businesses to expand internationally, as well as here in the UK, supporting key sectors and driving investment across the regions and nations.

Small Business Minister, Paul Scully said: “This new fund puts HSBC on course to have lent more than £100bn to UK small businesses within a decade, which is a great milestone for HSBC and even better for the communities across the country being helped to thrive

“This extra funding builds on the support available through government schemes like Help to Grow and Start Up Loans to help small businesses grow and reach their full potential.”

By Sion Barry

Source: Business Live

SMEs plan to spend an average of £111,175 on growth strategies, equating to a £633m total spend for all UK SME businesses, despite external factors such as supply chain issues and the ongoing impact of the cost-of-living crisis, according to new research from Aldermore.

35% of UK SMEs are planning to invest in new equipment over the next year. Businesses are also continuing to embrace the shift to online, with 35% planning to improve their online presence and 29% investing in digital marketing.

24% of SMEs plan to diversify into new products and services, while 20% will invest in marketing and events. Meanwhile, 24% will prioritise training for staff and 15% plan to invest in recruitment.

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Aldermore said the willingness of UK SMEs to invest in their business is evident in recent lending figures. Gross lending to SMEs stood at £4.8bn in Q4 of 2021, broadly unchanged from the previous quarter and seeing a £22.6bn total for the whole of last year.

Expanding their customer base over the next 12 months is the main priority for 50% of UK SMEs. Business leaders have had to consider business expenses, driven by the impact of the cost-of-living crisis; 45% of SMEs will be focused on reducing them to lessen the impact on their bottom line.

Other priorities to drive growth include:

• developing new products and services (26%)
• improving existing propositions (36%)
• investing in employee retention (25%)
• reacting to the sustainability agenda (29%).

37% of UK SMEs plan to fund their investment with business savings. However, despite specialist products being available, many business owners are continuing to dip into their own pockets to fund their investments, with 45% funding growth using products designed for personal use such as overdrafts (11%) or personal lines of credit, such as credit cards (10%).

Tim Boag, group managing director, business finance at Aldermore, said: “It’s encouraging to see that SMEs are planning to invest significantly in their business during the next year. Despite broader economic uncertainty, the cost-of-living crisis and ongoing supply chain issues, business confidence remains high, and SMEs are continuing to look to the future: to their recovery, growth and even transformation.

“However, it’s concerning that many SMEs are relying on products not designed for business use to fund their investments. Business leaders should explore specialist funding options designed with their specific challenges in mind, such as invoice finance or asset finance.

“At Aldermore, we’re focused on supporting SMEs, using our expert knowledge and specialist finance products. We recently created a new tool: the Aldermore BusinessFundingFinder, which allows businesses to answer a few simple questions around their requirements, such as the amount of funding needed, type of lending required and based on their circumstances, it guides businesses to solutions suitable for their needs.”

Source: Best Advice

Small and medium enterprises (SMEs) are increasingly optimistic as economic recovery from the COVID-19 pandemic continues, according to a study by premium finance firm Premium Credit.

The study found that 37% of SMEs expect their revenues to increase over the next 12 months, with 15% predicting increases of 10% or more. Twenty-six percent expect revenues to fall over the next 12 months, while 18% expect them to stay the same. Twenty-one percent said they do not know what will happen over the next 12 months.

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The general recovery from the impact of the COVID-19 pandemic was cited as the main driver for revenue growth by 58% of firms expecting growth, while 35% said it will be driven by launching new products and 34% by entering new markets.

Among firms that predicted falling revenues, 33% said they are still suffering from the impact of the pandemic, while 32% said they have lost clients, some of which have gone out of business.

Premium Credit’s Insurance Index, which monitors insurance buying and how it is financed, found that SMEs’ savings are being depleted. Twenty-seven percent of firms said their savings fell in the past 12 months, while 20% reported increased savings. For this year, around 5% had no savings, compared to 7% last year.

“Rising confidence among SMEs is good news, but companies clearly still face a lot of challenges in the year ahead and many have depleted their savings as they start to invest,” said Owen Thomas, chief sales officer of Premium Credit. “Premium finance is a very cost-effective way for businesses to buy insurance, and better manage their finances and cash flow by spreading payments. Our research shows nearly six out of 10 SMEs use some form of credit to ensure they can still afford business-critical insurance.”

By Gabriel Olano

Source: Insurance Business UK

Small-to-medium enterprises, or SMEs, represent around 90% of all business, and 50% of global employment according to the latest estimated by the World Bank. Small businesses represent the majority of the marketplace, but lenders are less certain about their prospects and so many such companies fid it difficult to secure credit financing.

Two ways in which an SMEs can secure credit are business loans and business cash advances, but what are the differences?

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What is a business loan?

A business loan is a form of lending, geared towards providing a company or other professional organisation with short-term cashflow – whether for growth purposes, or to weather a downturn in finances. Where a traditional personal loan is leveraged against the individual that applies for it, business loans are most commonly secured against the business and its assets.

There are two key types of business loan: secured, and unsecured. Secured business loans utilise business assets as a form of security or “collateral”, which the lender can seize and sell in the event the business cannot pay back the loan. Unsecured loans are more useful for smaller or younger businesses, as they do not require any form of asset security to set up, but at the same time generally come with a higher interest rate to compensate for the additional risk to the lender.

What is a business cash advance?

A business cash advance is a form of lending based on a given business’ existing and projected card revenue. Cash advances are generally a fixed sum with a variable repayment rate; a lender will examine your cashflow and potential future income from card transactions, and offer you a percentage of that card volume as an advance payment. Repayments are variable in relation to your actual monthly card volume, where you pay less on months with fewer transactions.

What are the differences?

Business loans and cash advances share some core traits in common, but generally serve different purposes. They are both key forms of borrowing for growing and established businesses, presenting the opportunity for sustainable growth with shrewd financial planning. However, they also have some crucial differences that are well worth understanding before making any major decisions on behalf of a business.

Firstly, business loans are a long-term form of lending. Though it is possible to take out short-term business loans, a majority include repayment terms of a year, 18 months or longer – with the ceiling for repayment periods at 25 years. Cash advances are typically shorter-term, and can often be organised more quickly.

While repayments for business loans are regular each month, the amount you repay in total could change depending on the rate of interest on the loan. Meanwhile, business cash advances are for an agreed fixed sum with repayments taken as a proportion of revenue, so the final bill will not change but it may take more or less time to pay it back and the monthly cost will vary depending on revenues.

Source: Descrier

Scotland’s smaller businesses continue to face a range of challenges amid the ongoing pandemic, but as the mood shifted towards recovery last year, we saw a notable upturn in the demand for finance. Equity investment, in particular, provided companies in Scotland with a platform for growth and development.

According to new data, published by the British Business Bank in its eighth annual Small Business Finance Markets report, equity investment in Scotland’s vibrant community of smaller businesses had soared to £403 million by the end of September – more than double the same period in 2020. A total of 147 equity deals were recorded, equating to 8 per cent of the UK’s equity deal activity – higher than Scotland’s 6 per cent share of the business population.

Across the rest of the UK, there was a similar increase in equity investment, with overall equity deal values on track to double from the £8.8 billion total seen in 2020. By quarter three, Scottish investment was already 42 per cent ahead of the total £283m registered during the full 12 months of 2020.

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Despite the positives here north of the border, our research highlights that geographic imbalances remain across the UK with external finance concentrated in London, where firms attracted 70 per cent of 2021 Q1-Q3 investment value. This only underlines the importance of ensuring that smaller businesses at any stage of growth can access the funding they need to achieve their goals, regardless of their location.

Helping to address this, alongside a range of programmes already in place, the UK Government announced £150m to provide a new fund for Scottish businesses as part of the October 2021 Spending Review. It will be administered by the British Business Bank and we will be working closely with Scottish Enterprise, the Scottish National Investment Bank and other local stakeholders to deliver this increased support.

As well as the increase in equity deals, the study also showed us that bank lending is close to returning to pre-pandemic levels. In terms of post-pandemic recovery, the British Business Bank’s report suggests there could be continued economic recovery throughout 2022, with strong demand expected for investment to fuel business growth. Although 2022 may still provide a challenging environment for some businesses, many others report that they are seeking to pivot towards growth, improve productivity and transition to a net zero economy.

Providing access to finance will play a big part in ensuring the UK economy continues to grow sustainably, but there are also a number of factors we need to consider that might prevent certain individuals or groups in society from being able to access funding. For example, that the report reveals that while ethnic minority-led businesses are more open to using finance, and more ambitious for business growth, access to finance remains an issue, and they are twice as likely to see access to finance as an obstacle to running their businesses. Additionally, the appetite for using external finance among female entrepreneurs has significantly increased, but it remains lower than for smaller businesses run by men.

The need to level the playing field, both in geographical terms and across under-represented groups is clear. We are committed to supporting entrepreneurs to overcome any hurdles they might face, whether it is knowing how to apply for finance, understanding what types of finance are available to them, or supporting them with the applications process.

For some, 2022 may be another challenging period for their businesses. However, we know that many are tentatively optimistic, still targeting growth and have big plans to make their ambitions a reality after two very uncertain years. Improving access to finance can only help smaller businesses to get there and our aim for this year is to help them on that journey.

By Mark Sterritt

Source: The Scotsman

A survey of more than 2,000 UK-based small and medium-sized businesses (SMEs) has found that most are feeling pressure to improve their sustainability credentials, but one-third believe it will be too expensive for them to take action this year.

Conducted late last year by tech and software firm Sage, the survey covered 2,040 decision-makers at SMEs in the UK, with the results being published this week.

Half of the respondents said they see sustainability as “important” to what they do, with 13% describing environmental issues as “business-critical”.

Yet just one-quarter of the respondents said they expect their business to become more environmentally sustainable in the next 12 months. The most common challenge to implementing measures to improve environmental outcomes was cost. One-third of the survey respondents said they think the changes they want to make would be too costly to implement at present – particularly with the costs of raw materials and energy increasing.

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The other most common challenges were found to be a lack of time to dedicate to sustainability, cited by 27% of respondents, and a lack of in-house skills, raised by 25%. This latter point resonates with separate, recent research from the SME Climate Hub, which polled 194 SMEs and found that two-thirds do not believe they have the right skills and knowledge in-house to reduced emissions and build climate resilience.

Many of the businesses surveyed by Sage acknowledged that failure to show sustainability leadership could prevent them from meeting the changing demands of key stakeholders. Almost one-third (29%) said they feel pressure to become more sustainable from customers, while 26% feel pressure from the UK Government and 23% feel pressure from their staff.

Common pressure areas include talking publicly more about the overall impact of the business, and providing more evidence that products and services are low-carbon or otherwise bear some kind of ‘green’ credentials.

The findings broadly echo those from a separate, similar study conducted by bank NatWest, which published its results in January. That study revealed a drop in the proportion of SMEs positioning environmental sustainability and a priority issue in the short term, with Covid-19 and the energy price crisis taking precedence.

SME support

The UK Government has already published guidance on how SMEs can and should measure and report emissions, following a call to action from Prime Minister Boris Johnson in May 2021.

Other supporting tools include an online hub enabling businesses to access practical information on how to approach the net-zero transition, from O2 and the British Chambers of Commerce; and the SME Climate Hub, which recently worked with CDP to launch a new framework for measuring, reporting and reducing environmental impacts.

And, just this week, Small Business Britain has launched a new education programme in partnership with Oxford Brookes University.

The new ‘Small Business Sustainability Basics programme’ is a free, online, six-week short course that will run from March to May 2022. It will help SME decision-makers to understand their role in the net-zero transition and how they can leverage the money-saving and growth opportunities of reducing their environmental impact and innovating products and services.

By Sarah George

Source: Edie