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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

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Fintech firm urges SMEs to look beyond conventional bank funding

New analysis from ThinCats, the fintech lender to mid-sized small firms, shows that Manchester has a higher proportion of high-growth companies and businesses that are more likely to require funding during 2019 than the UK average.

ThinCats also discovered that businesses in Manchester have been quicker than most regions to look beyond the banks for funding since the financial crisis.

Almost two-thirds (64%) of Manchester-based SME loans were sourced through banks in 2007.

This figure has come down to 53% more recently, slightly below the UK average of 57%.

ThinCats is urging Manchester’s business owners to make sure they consider the increasing number of non-bank lenders when looking for funding in 2019.

Richard Lamb, director regional business development at ThinCats, said: “We analysed more than 200,000 businesses across the UK and found that the likelihood of Manchester businesses needing external funding in 2019 is significantly higher than the UK average.

“This may be to expand their teams, to help service new contracts, or to invest in new equipment.”

He added: “Manchester has proportionately more high growth companies compared to other parts of the UK.

“Unfortunately, these are exactly the types of companies that the high street banks struggle to fund.

“Half of businesses that are declined funding by their banks fail to look elsewhere. It is vital that Manchester’s entrepreneurs don’t give up at this stage.

“We estimate there are about 3,800 businesses in Manchester alone that we could help with funding.”

He said ThinCats has almost £1bn of capital from institutions and other long-term investors waiting to be deployed across the UK.

Further analysis by Thincats claims that Liverpool-based companies have been relatively slow to look beyond the banks for funding since the financial crisis.

It says that 78% of Liverpool-based SME loans were sourced through banks in 2007, and this figure has come down to 57% more recently, in line with the UK average.

Richard Lamb said: “There are around 1,900 SMEs in Liverpool, alone, that we could help with funding.”

Source: The Business Desk

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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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6 ways to ensure your SME gets funding

Over half of SMEs do not obtain the funding they need to survive, says Giles Fuchs.

It’s estimated that more than 100,000 businesses in the UK are looking for funding at any one time. Yet only a small percentage will secure sufficient funding to enable them to grow and expand into credible businesses that have a real market impact.

Clearly, there’s a problem and it is contributing to the failure of as many as nine in 10 early-stage businesses.

For many young companies, securing the scale-up funding they need is still challenging. The UK has a great reputation for supporting start-ups, it’s ranked third by the OECD, but only 13th for its ability to help companies secure the funding they need to become viable.

Also, the prospect of Brexit currently casts a shadow over the UK economy. Even though the Government has recently pledged to provide up to £200m of additional investment in UK venture capital and growth finance in 2019-20 if the European Investment Bank withdraws its support after Brexit, it is still a small percentage of the funding needed. Recent research from small businesses finance provider Liberis, revealed that over half of UK SMEs are still unable to access the funding they need to grow.

UK SMEs contribute some £200bn to the UK economy, so ensuring they can access the funding they need is vital. In the current uncertain climate, to try and secure such backing, whether from private sources, such as high-net worth individuals or family offices, or institutions, it has never been more important for early-stage companies to plan properly and set out a compelling vision.

Develop a proper plan

One of the most common reasons that early-stage businesses fail to raise further funding is a lack of proper planning. Typically, they have grown with less regard for proper structure and process and more emphasis on entrepreneurial energy and drive. However, to secure serious funding from credible investors, management teams need to put together a comprehensive plan which identifies the type of investor they are targeting, best timing for the approach, the quantum of funding sought, and how the company will cope with the rigour of the questions that investors will ask.

Don’t be shy to show your passion

Investors are more likely to back a business if it’s something they’re inspired by, so be passionate about your company and others will buy into it. Remember, you will be one of hundreds if not thousands of businesses your potential investors will be considering, so bringing enthusiasm and excitement to your pitches and meetings will help you stand out. It will help engage investors and help persuade them that you are genuinely creating a business worth backing. Retaining the passion that first prompted you to set up your business could be key in unlocking the funding to help it grow.

Create a compelling narrative

Given young companies are at an early stage in their growth, they will most likely not have delivered substantial commercial success. So, it’s important that you create a compelling narrative for the company as that is what investors will buy in to and will persuade them to back a business. It’s important to have a clear, concise proposition, which outlines the market potential articulately – and why someone would want to invest in it.

Demonstrate the growth prospects

Showcasing your strategy and proposition is the starting point but practically demonstrating the growth potential of the business is crucial. Anchoring your vision in a clear business plan that outlines in workable, pragmatic steps how the company is going to secure its growth will be what investors are expecting.

Have a strong management team

Having a strong management team that investors can see is capable of delivering on the vision, strategy and business plan that you have put together is essential. Investors might be excited by your plans, but most are hard headed and want to know who will be responsible for delivering on these plans. If you can’t show that you have the management bandwidth in place, then you will struggle to secure funding.

Ensure the timing is right

This is the most intangible of all the factors outlined, but timing really is key. It’s important to only consider seeking investment when the business is in a strong enough position and is performing well enough to support this. It’s vital that your company has the structures in place, the systems, the human resources and IT support to provide a proper foundation for your fundraise. You can still go for funding without all this being in place, however, you will increase your chances of success immeasurably if this has all been thought through and implemented.

Seeking funding may seem daunting, the hurdles may seem high, even insurmountable, but treat this exercise with the same rigour and focus as you have to take your business this far, and it is more than likely that you will be rewarded.

Source: SME Web

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Government Grants for SMEs in the UK – A Hands-on Guide

Winning a government grant can be a real boon for SMEs looking for funding, technology or expertise. In this post, we will discuss everything an SME needs to know about such grants.

Running a successful business is all about pre-empting, overcoming – and, at times – walking around hurdles. These hurdles come in every shape and size you can think of – from HR and compliance to marketing and branding. But if there’s one common denominator among all the problems businesses face, it has to be the money.

Take funding, for example. SMEs around the world and across the board are known to struggle when it comes to raising money. SMEs in the UK are no exceptions to this. In fact, so difficult is raising money via traditional, mainstream and high-street lenders that SMEs have gradually started thinking beyond banks and towards alternative funding channels.

In such times, the role played by the government becomes more crucial than ever. Government grants are, without a doubt, the face of this role. This is the reason why understanding how these grants work and how your SME can give itself a good shot at winning one are important. In this post, we will try to cover what government grants for SMEs are, how they work and how to find and apply for a grant that is suitable for your business.

What is a Government Grant?

A government grant is essentially an incentive package made available by various government bodies and organisations to individuals as well as businesses. Government grants (barring the finance grants) are usually non-repayable.

Depending upon the nature of the grant body and the grant objective, these grants can come in a variety of sizes and formats. As far as small businesses are concerned, such grants range from £1,000 to £500,000. Some of the bigger and more prized grants can go even higher.

Why Are Grants Given to SMEs?

Government grants have been there for a long, long time. The names and forms they have taken may have changed over time – from business subsidies to business support – but the objectives haven’t. If you were to analyse government grants across business sectors and districts, two things become very clear:

  • Most government grants have a singular objective – to keep the economy growing. This objective takes many avatars such as employment generation, sectoral development, regional development and so on. Grants that have these objectives are more or less permanent fixtures.
  • Other grants aim to follow, aid and complement ongoing policies of the government. Such grants typically reflect the incumbent government’s views in regard with trade, environment, social welfare, technology etc.

To put things in a more sweeping perspective, we can say that government grants have three clear objectives:

  • Boost economy through regional and local development
  • Generate employment by supporting businesses
  • Create an economic environment that encourages innovation, entrepreneurship and ‘home-grown’ research

As of 2018, nearly 200 government grants are available for SMEs in the UK.

Why SMEs Should Take Government Grants More Seriously

Even though government grants are incredibly appealing, very few SMEs actually realise the potential of such grants. Here are some features of government grants that SMEs can’t afford to overlook:

Government Grants Are Diverse

Very specific grants are available across all business sectors. This allows SMEs to compete more fairly for similar grants.

Grants Are More Than Just Money

As we will discuss in the next part of this post, government grants offer much more than just money.

Winning a Grant Validates Your Business Idea

A large number of SMEs are stuck in the validation loop that stops them from expanding or trading more confidently. Inadequate funding makes matters even worse. A grant can be a good way to turn the corner in such times and receive external recognition and validation.

Government Grants: Shortcomings & Drawbacks

While the features associated with government grants are certainly attractive, there exist shortcomings and drawbacks you should be aware of:

The Competition Is Fierce

The competition for government grants is fierce to say the least. Since young businesses, start-ups and established businesses all tend to spill over into the space that’s reserved for SMEs, the competition can become entirely off-putting.

It Can Take Months Before You See the Money

Applying for a government grant isn’t always the smoothest of processes. It can take many months for the assessment process to conclude, making grants irrelevant for businesses that require urgent funding.

Grants Can Never Replace External Funding

Given their limitations in size and scope, government grants cannot replace external, third-party funding channels – not in the long run, anyway.

Types of Government Grants for UK SMEs

In our guide to start-up funding, we have already discussed the various types of government grants. In the context of SMEs, these types remain more or less the same.

Direct Grants

A direct grant is a project-specific and objective-driven cash reward to businesses that meet the criteria. This is what most businesses think of when they think of a government grant.

Despite being the most popular and sought-after type, these grants come with a host of limitations and riders. As things stand today, direct grants focus more on young SMEs (trading for 5 years or less) in economically disadvantaged regions and districts. Furthermore, the grant amount is usually on the lower side. Given these facts, one would be forgiven to think that direct grants are good for encouraging businesses, but not necessarily supporting them.

  • Direct Grants Are Not Free Money!

It’s a common misconception among business owners and operators that winning a direct grant is just like winning a lottery. The fact is direct grants are nothing like free money.

Almost every direct grant scheme requires you to match the grant amount – a pound for a pound.

In other word, a direct grant of £10,000 will need you to raise £10,000 on your own before you see any of the grant money.

We, at Commercial Finance Network, have helped numerous SMEs raise the capital required to win direct grants. You can learn more about our services here and request a free quote here.

  • Most Direct Grants Are Project-Based.

Unlike other grant types, direct grants are almost always project-based. The grant objective clearly tells you what you’re expected to spend the money on. Some grant bodies go so far as to monitor the spending.

  • Example

A good example of an SME direct grant is the Business Energy Efficiency Programme organised by various local councils in the West Midlands. This direct grant offers rewards up to £20,000 for the qualifying businesses that implement energy saving technologies in their operations.

Finance Grants

If you are looking for a well-meaning financing support for your SME, finance grants should always be the focus of your search.

A finance grant combines the features of grants and loans. Also known as ‘soft loans’, such grants are an excellent way of raising a significant sum of money for SMEs. Typically, the loan amount can go from as low as £5,000 to as high as £250,000. Finance grants are usually available around the year. Unlike direct grants, however, finance grants are repayable. The terms of repayment are subsidised through public funding. So, you may either get a loan that’s fully free of interest, or you may get a lenient repayment schedule with generous repayment holiday months/years.

  • Soft Loans Are Not Always Project-Based

Unlike direct grants, finance grants (soft loans) aren’t always project-based. The grant objectives can be wide-ranging to allow you more control over the spending.

  • The Qualification Criteria Can Be Stringent

Quite a few finance grants require you to prove that your SME is unable to secure funding from other mainstream lenders. This translates into additional documentation and longer processing times.

  • The Grant Amounts Are Flexible

The biggest advantage that finance grants offer is their flexibility. You can negotiate the loan terms and amounts with the grant body (much unlike direct grants that leave no room for negotiation).

  • Example

ART Business Loans make for a good example here. This finance grant offers low-interest loans to businesses that generate employment in the West Midlands. The loan size ranges from £10,000 to £150,000.

The UK Export Finance (UKEF) scheme is also a very fitting example of how government grants are at their efficient best when partnered with private investors and lenders. It aims to promote exports to our major cross-border trade partners by helping SMEs raise funds, win overseas contracts/orders, fulfil these orders and access trade finance.

Tax Relief Schemes

Tax Relief Schemes are indirect grants offered to qualifying SMEs. There are little to no upfront benefits to such schemes. In the long run, however, these tax savings can be very attractive. Here are some common and ongoing tax relief schemes that you can focus on:

Tax Relief Schemes for SMEs

1. Employment Allowance

Most businesses are required to contribute to the National Insurance every year. By securing the Employment Allowance, your business can save up to £3,000 on these contributions.

2. SME Business Rates Relief

All properties owned by businesses are charged business rates by local councils. If your business holds one property (valued at £12,000 or less), you can apply for 100% Small Business Rates Relief. For businesses holding two or more properties, it’s still possible to get proportionately lower relief.

3. Corporation Tax Reliefs

  • Capital Allowances let SMEs claim tax reliefs against the purchase of business assets.
  • R&D Reliefs are meant to encourage R&D spending.
  • Creative Industry Tax Reliefs provide special tax reliefs to ‘creative’ industries such as arts, film, theatre, music and digital media.
  • The Patent Box is one of the most exciting tax relief schemes out there. This scheme allows inventors and businesses to claim tax reliefs against profits made by the use or licensing of their patents.
  • There are many other Corporation Tax Relief Schemes tailored for the need of SMEs. You can refer to this page to learn more.

Tax Relief Schemes for SME Investors

1. Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme is perhaps the strongest investment magnet for SMEs. Under this scheme, SME investors can claim tax credits and reliefs of up to £300,000 each year. This scheme applies to total investment of up to £5 million per year.

2. Seed Enterprise Investment Scheme (SEIS)

This scheme is similar to EIS but limited in scope to serving start-ups and young businesses. If your SME has been trading for no more than 2 years, your investors can claim tax credits under the SEIS.

SME Grant Finder: How to Find Government Grants

Searching through available government grants is no longer a dreadful or time-consuming task. Just head over to the Business Finance and Support page and filter through the available options. This page allows you to zero in on government grants based on your location, business type, size and turnover.

5 Steps SMEs Need to Take to Win Grants

1. Applying Early

Applying early gives you an important edge over competitors. To be able to do this, you need to be aware grant announcements.

2. Preparing a Detailed Business Plan

It doesn’t matter what sort of loan, support or grant you are after – you will always need a business plan that paints a clear picture of the present state of your business and your future objectives. A good, in-depth business plan that answers questions even before they are asked enormously improves your chances of winning government grants.

3. Understanding the Grant, the Grant Body and the Grant Objectives

If your grant application is rejected, it’s very much likely that the fault lies neither with your business nor the grant – it lies with the incompatibility of your objectives with those of the grant body. The best way to avoid this is to apply for grants that share objectives with your business.

4. Having Professionals on Board

If you don’t have prior experience in applying for grants, it’s always a good idea to hire grant experts and consultants.

5. Preparing a ‘Winning’ Grant Application

A generic, off-the-bat grant application is never going to win you a grant. Preparing a grant application that lets the grant body know how you share in their objectives is the key.

We Help SMEs Grow!

Government grants offer a host of opportunities for SMEs to raise the much-needed funding. It is, however, never a good idea to rely heavily on government grants. The timelines are unpredictable, the amounts are usually lower than what you need and you will, in most cases, need to raise external funding anyway.

But it’s not all bad news – there are easier way to fund your business.

Commercial Finance Network – a leading whole of market broker – has helped many SMEs across the UK secure fast and low-interest funding. To know more about our industry-leading finance services, you can visit this page.

Check your eligibility for a low-interest business loan and other finance products by requesting a free quote here.

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Get Your SME Finance-Ready – 5 Actions to Improve Your Business Loan Eligibility

Looking to get an SME loan? Avoid these common mistakes to immensely improve your chances!

Taking the entrepreneurial leap of faith might well turn out to be the most rewarding thing in your life. The sheer joy of seeing a plan, a concept – a dream, indeed – materialise is indescribable. But to get there, you’ll first need to take off the rose-tinted glasses.

The world of business is ruthless beyond measure. No industry, no sector, no niche is devoid of competition. Therefore, your business – like every other business – will need to withstand this competition day and night in order to survive, thrive and, eventually, succeed. And this process invariably involves scaling up your business – a point at which drawing strength from your personal savings or seeking help from friends or family just isn’t enough. This is when you, as an SME, are most likely to seek external funding and financing. This, also, is when you have every chance of seeing multiple business loan applications turned down.

How does a young SME go about securing a business loan that’s both substantial and fair?

That’s a question that needs to be discussed in multiple blogs. For now, we will take a look at the steps that you can take to give your business the best chance of getting business loans. Before that, however, it will be more prudent to understand how the lenders perceive SMEs.

SME Lending Is Changing

  • The lending landscape is fast changing.
  • Open Banking will make getting business loans less difficult for SMEs.
  • Banks’ isn’t the only voice that matters.

SME Lending in the UK – A Stat Check

  • Asset finance, general business loans, equity finance & most other commercial SME loans have grown in size since 2015.
  • As many as 7 in 10 small-business loan applications were approved by lenders in 2017-18.
  • 62% of all SME finance applications in 2017-18 stated business growth as the principal reason for the loan.

British Business Bank SME Finance Report 2017-18

UK Finance Quarterly Reports

Liberis Business Survey 2018

Regardless of the narrative or the wider picture, it’s safe to say that the lenders have always dictated the terms of the commercial finance game. They have had the absolute right – at times, an unfair proposition – to accept, modify or reject business loan applications from SMEs as they see fit. While this isn’t likely to change anytime soon, there are definitely some levellers being introduced by the government to make the playing field more even.

The first amongst this is the rather dramatic arrival of Open Banking (better known as PSD2 across mainland Europe) earlier this year. This purported game changer will not have as much of an impact on everyday banking as most thought. The lending game, however, has been forever changed since its introduction. Thanks to the absolute customer-side control of finance data, your business can now request – nay, compel – big banks in the UK to share your 12-month financials, credit history and other data with private, P2P or overseas lenders. While such data sharing isn’t a new concept, the edge lies in the fact that Open Banking will let the borrower have more control over their data. What this means, essentially, is that getting your SME finance-ready will be much, much easier now than it was five years ago. The lenders will be able to make better, more informed lending decision based on this data – just about as seamlessly as personal loan or credit card applications work.

This development is in perfect alignment with the Small Business Enterprise and Employment Act of 2015 that had made it mandatory for banks and institutionalised lenders to share finance data with alternate credit partners for SME loans.

The fact of the matter is – if you run an SME in the UK, you have a great chance of securing a business loan today than ever before.

What Does It Take for an SME to Get a Business Loan in the UK?

The lending criteria differ from one lender to another. They also depend upon the type of the loan you seek. Some of the most common and fundamental lending criteria for SMEs in the UK are:

  • The borrower should be a registered business entity (Sole Trader, LC, LLP or PLC).
  • The business should have a ‘demonstrable’ trading history of 18-24 months.
  • The director(s), owner(s) or proprietor(s) should be able to furnish personal guarantees if required.
  • The business financials should be able to demonstrate a certain minimum turnover (subject to the amount of the loan).

Understanding Why the Lenders Are Forced to Say ‘No’

Despite the lending atmosphere that’s gaining in positivity as far as SMEs are concerned, quite a few business loans are still routinely declined. In this light, it’s important to understand the common reasons why small-business loan applications fail to get approved. This will help you eliminate a major hurdle in getting finance for your business.

The Business Isn’t on Top of Their Credit Score(s)

Countless SME loan applications fail to pass the very first check that banks perform – the credit check. What’s more astounding is the fact that many SME owners aren’t even aware of the credit trail they leave while their business is trading.

The Business Has Problems

It’s a vicious cycle but that’s how it is.

Most businesses apply for loans when there’s a cash crisis. And lenders don’t like such situations. This Catch-22 is perhaps the biggest hurdles SMEs face in getting approved for a business loan. Along with cashflow problems, other problems such as a questionable business plan, a history of poor business decisions, lack of expertise at the helm and inability to prove the growth potential often lead to loan applications being turned down.

The Time Just Isn’t Right

You cannot apply for a regular SME business loan if your business is just starting up. Most lenders will want to see a trading history of no less than 2 full years. Similarly, if you’re applying for a business loan and your business has been trading for 20 years with little to show for it in terms of growth, the lenders won’t take a liking to your application.

There’s No Collateral Provided

Unsecured business loans attract closer scrutiny from lenders. So, for an SME that doesn’t have a great deal of creditworthiness, it becomes imperative to provide additional security. Business loan applications that aren’t backed by adequate collateral or guarantees usually get declined.

The Plate is Already Too Full

Just like personal loans and mortgages, you cannot expect to get a business loan for your SME if you already have a number of repayments to take care of. A business loan application from an SME dealing with a plate full of loans is almost certain to get rejected, leading to a soft credit enquiry mark that further worsens the situation.

Steps You Need to Take to Improve Your Business Loan Eligibility

There’s no telling what the lender will think of your business loan application. Perception is a strong phenomenon and is still relevant despite much of the work being handled by tried-and-tested credit algorithms. You can, however, take the following steps to make sure that your application stands a very good chance of finding takers.

1. Make Sure the Foundation of Your Business is Strong & Convincing

You want the foundation of your business to be sound, strong and stable. This is vital not just to secure a business loan but also to achieve profitability in the long run.

When you know that your business has a great shot at success, you should be able to convince other people of the same. To convince lenders, you will need a great business plan – especially when your business is relatively new. A good business plan should be accompanied by a cause-and-action plan. This will involve a good explanation of why your business needs a loan, how you plan on using the funds and what your repayment schedule will be like.

A fully customised proposal with all the relevant details shows the lender that you’re serious about the business. This always works in your favour as lenders perceive you as less of a risk and more of an opportunity.

2. Get Your Business Financials in Order Before You Apply

Many businesses get this wrong – but you shouldn’t. Never apply for a business loan if you don’t have an independently audited, tax-certified financials for at least two years in your possession. These financials typically include the tax returns, quarterly balance sheets, cashflow analysis and profit/loss statement.

It’s common for lenders to also request projections over the loan term. So, it’s a good idea to prepare revenue, profit/loss and assets/liabilities projections for up to 5 years before you approach a lender.

3. Know and Understand Your Credit Scores

Regardless of everything else, most lenders will eventually take a look at the credit history of your business before making a decision. Any obvious red flags on this report – from delayed payments and missing records to frequent enquiries and grave defaults – will hurt your application. So, it’s important to know and understand your credit scores before you apply. This includes building a solid credit history for your business as well as personal accounts.

Less than 20% of all SMEs in the UK proactively monitor and assess their credit scores – you don’t want to be a part of that group!

Some useful steps in this regard are:

  • Checking your business credit score once every quarter
  • Filing for corrections when you spot inadvertent mistakes or errors
  • Using a dedicated business account for your business activities
  • Utilising credit facilities such as overdrafts and credit lines judiciously
  • Making timely repayments
  • Not making ‘hard’ enquiries for credit unless you are ready to submit a full application

4. Let the Lenders Know That You Are Invested

A commonly ignored and often decisive mistake is the failure to demonstrate your involvement in your business. Many businesses – especially the ones not registered as Sole Traders – face this problem, just because there’s no ‘face’ attached to the business.

An easy way to avoid this is to make an offer for a collateral. This shows the lenders that you are willing to share the risk with them. Secured loans are always easier to go through.

5. The Time and Timing – Both Should Be on Your Side!

As a rule of thumb, you shouldn’t go searching for a business loan when your business finds itself cornered with nowhere to go. This will only lead to you ruining your credit history with multiple rejections. Having enough time at your disposal is the key. This is where good business intuition and experience will come in handy for you.

As far as getting the timing right goes, you should be well aware of the market situations before applying for a loan. Has the industry your business operates in been faring poorly of late? Have there been any major changes in the lending landscape recently? What has been the trend in the interest rates being offered over the last six months?

Answers to such questions will give you an idea about whether you should apply for a loan right away or it’ll be wiser to wait for a few weeks.

Getting a Business Loan is a Process and Should Be Treated as Such

Many loan applicants think that lenders are prone to making arbitrary decisions. While true in rare scenarios, this usually isn’t the case. The lenders are also in the business – the business of lending money. The more businesses they lend to, the more money they end up making. So, as long as you have taken care of the ‘risk’ factors discussed in this article, you will have little to worry about when you apply for an SME loan.

Applying Left, Right & Centre – A Big No!

The biggest – and unfortunately, the most common – mistake that SMEs make is to apply for credit with no plan of action. Applying at a dozen places will not only lead to simultaneous rejections that will do your credit score no good but also handicap your business from accessing finance when you need it the most. Before applying for any business loan, you should be aware of what your options are – without making hard credit enquiries.

That is exactly what we at Commercial Finance Network, a leading whole of market broker, do for you. Working with some of the best-known and specialist lenders across the UK, we make sure that you get a loan offer that’s fair, fast and flexible.

The days of blindly accepting the first offer that comes your way are long gone. Let our team of experts curate the best business loan quotes for you. Call us on 03303 112 646 or contact us to speak with one of our Business Loan Specialists today!

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30 per cent of SMEs require funding to survive

New research by leading small business finance provider Liberis finds that nearly 30% of UK SMEs require funding simply to stay afloat.

Across a broad range of criteria made available for business owners, ‘keeping afloat’ scored amongst the top five reasons for finance requests; with ‘purchasing new equipment’, ‘keeping up to date’, and ‘other operating costs’ also scoring highly.

The research also found the most common sum of a request was of around £30,000 and was required to take the business to the next-level.

Today, there is an understood resistance from banks to lend to UK small businesses, prompting concern on the wider impact on UK small business survival rates. Liberis’ research also found there is a perceived reluctance among UK banks to invest in risk and innovation, indicating a demand for alternative financing options.

As the lifeblood of the UK economy, SMEs contribute more than £200bn a year, with this number expected to grow by almost 20% by 2025. Yet, without a vital cash injection, this 2025 vision will be severely stinted.

With 62% of UK small businesses viewing funding as a mechanism to grow, it is worrying that 55% are unable to access this required funding.  Concerned for the growing pressure and expectations on banks and other mainstream finance providers, alternative financing providers such as Liberis, can provide a simple, flexible and transparent funding system to help UK SMEs achieve their ambitions.

Partnering with companies including Worldpay, Sage Pay and JustEat, Liberis has a direct reach over 750,000 UK small businesses and supports SMEs in obtaining cost-effective funding.

Commenting on the report, Rob Straathof, CEO at Liberis, said: “In an increasingly uncertain economic climate, there is a greater need to protect our small businesses and provide them with much needed working capital. Liberis occupies a space which has been left empty by the traditional role of banks and lenders to provide financial support to small businesses. We’re on a mission to support small businesses and help them reach their goals.  From the local bakery to the neighbourhood pub, we’re here to provide a lifeline to keep them afloat.”

Earlier this year, Liberis announced a funding investment of £57.5million to support an estimated 100,000 jobs by 2020. The amount was secured in combined funding from British Business Investments, Paragon Bank, BCI Finance, and Blenheim Chalcot, the UK’s leading digital venture builder; and demonstrates Liberis’ long-term aim in supporting UK small businesses through such partnerships.

Straathof, added: “The traditional channels of business loans and funding are, in today’s ever-changing world, no longer able to operate at the same capacity at which they were once expected. In fact, the total amount of bank overdrafts and loans outstanding to small businesses has decreased by nearly £6 billion of the past 5 years according to UK Finance Q2 2018 research. This has enabled Liberis to protect UK businesses as we aim to provide much needed working capital – not only based on credit history, but business potential too – whilst delivering a trusted financial product through credible partners.”

Source: London Loves Business

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Why small businesses need to unlock funding for growth

According to Bloomberg, 80% of businesses fail within the first five years and of the 20% still standing, 80% of those statistically will fail in a further five years. We often see start-ups winning rounds of funding, but growth seems to slow down once they reach the development capital stage, as business owners struggle to raise capital to fund business growth in today’s tough market.

Access to funds for small businesses and start-ups is a true catalyst for growth and success. Supporting growth of SMEs is essential for the economy of the country in the pursuit of innovation and progress. Particularly in the run-up to and post Brexit, according to government figures, SMEs combined turnover constitutes almost half (47%) of private sector turnover in the UK, reaching an annual total of £1.8 trillion – making funding crucial.

Many entrepreneurs and small businesses are completely unaware of the sources of cash as well as other less conventional funding methods available to them. For small businesses to be successful, it is important that they apply for right type of funding at the right time, as speed of funding has been identified as integral to achieving this growth. Despite this, many small business owners are yet to take advantage of the funding available to them.

Unlike larger companies that have a whole department dedicated to finance, most small businesses won’t have such resource, meaning owners will need to add fundraising to their list of skills. This often leaves many small business owners unsure of which funding they are eligible for or where they should even apply for the funds they want.

There are a huge number of options available to small businesses in the UK, from Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS), very advanced crowdfunding and angel networks, low rates of corporate tax, R&D tax credits and entrepreneur’s relief in the UK. While having so many options is great, this adds yet another layer of confusion in terms of understanding which is best for your individual business needs and objectives.

This is why I have briefly outlined the advantages of different types of free cash sources and equity available to UK small business to help understand the best option to help fund growth:

  • The UK is one of the best places in the world for equity funding. Tax incentives such as SEIS and EIS are the government’s tax incentives to UK income tax payers to try to level the playing field between the relatively high risks of investing in the shares of unlisted small companies.
  • Often forgotten are R&D tax credits. The government are keen on paying out on R&D tax credits if there is substantial proof of research, development and innovation.
  • Crowdfunding, which also offers an excellent route to raising the capital. As the crowd will help sense-check ideas before you spend money, the marketing of shares will raise your company’s profile and it helps achieve a higher valuation with a crowd of shareholders than with a single financial investor.
  • Angel networks, which are a more sophisticated version of the crowdfunding platforms – angels start at about £25k upwards.
  • There is a comprehensive list of what funds are currently available, many new ones open and many closed. My latest book, “Reboot Your Business” details the 140 different funds available for UK-based SMEs.

Many small businesses struggle to find the funding they need to grow. It is important that they are equipped with the knowledge and tools to succeed. As the level of competition in the market increases and as Brexit looms, funding options have never been as important as they are now.

Source: SME Web

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Britain’s SMEs Facing Triple Challenge Warns CYBG

Britain’s SMEs have recorded the worst business health reading since 2014, as rising business costs, a dip in confidence, lower net business creation and a lack of borrowing are taking their toll, according to the latest research by CYBG in partnership with the Centre for Business and Economics Research (Cebr).

CYBG’s quarterly SME Health Check Index dropped to a score of 42.0[1], down 48% since 2014 and the fifth consecutive quarterly fall[2], suggesting a worsening business and macroeconomic environment since the EU Referendum in June 2016 and the ongoing Brexit negotiations.

David Duffy, CEO of CYBG, said:

“SMEs are the lifeblood of the UK, helping to drive growth, create jobs and sustain economic health. But SME confidence appears to be in short supply as many small firms are seeing rising business costs alongside continuing skills shortages.

“Businesses are scaling back their investment and borrowing due to the wider economic uncertainty, contributing to the decline in the Index. The Government’s business rate changes in last November’s budget were appreciated, but in the current environment, SMEs would welcome more incentives to address skills shortages or further tax reductions to manage costs and restore confidence.”

Representing 5.7 million enterprises, or 99.9% of total businesses in the private sector with a combined turnover of £1.9 trillion, the UK’s SMEs are unquestionably the heartbeat of the national economy. However, they are facing three key challenges, namely:

1. Rising business costs hindering growth: According to the Index, the costs faced by the UK’s SMEs grew at an annual rate of 2.6% in the fourth quarter of 2017, with one of the key drivers being a rise in employee costs, suggesting historically low unemployment may be beginning to push up wages.

The rise in business costs is hampering SMEs’ growth plans, and according to new research by YouGov – conducted on behalf of CYBG – almost a fifth (19%) of SMEs, representing over one million, say rising business costs have greatly hindered the success of their businesses. Of those, 42% said it has resulted in lower levels of investment back in the business; 35% have been unable to build up cash reserves; and, 28% said it has caused an inability to hire new staff.

2. SMEs dip in business confidence impacting investment : A key driver behind the Index fall, figures show that SMEs are less confident and borrowing less, with lending down 3.7% to £92.5 billion in the year to the end of Q3 2017, the largest drop since the Index began in 2014. In terms of the last quarter for which data is available (Q2 to Q3 2017), bank lending to SMEs fell by £1.9 billion, or 2% year on year.

Encouragingly, UK Finance data published at the end of February shows that lending to SMEs has stabilised in the final quarter of 2017, but firms delaying investment decisions remains a concern.

3. UKs skills shortage causing annual sales loss: According to CYBG’s research with YouGov, the UK’s skills shortage is leading to an estimated £7.3bn annual loss in sales for SMEs, equivalent to approximately 252,000 new jobs on an average UK salary[3] , and worth around £97 million in corporation tax revenues for the Treasury.

The research shows more than half (55%) the UK’s SMEs – representing 3.1 million companies[4]  – believe the failure in finding the right talent is impacting on the bottom line.

These firms say, on average, they are losing 18% – almost one-fifth – of potential annual revenue due to the skills shortage. According to calculations by Cebr, a leading economic think tank, this skills shortage leads to a £7.3 billion loss every year for Britain’s SMEs.

Relatively new and medium-sized companies say they are being hurt most by the inability to find the right staff, with three in five companies employing 50-99 employees or 2-5 years old particularly feeling the strain, suggesting that the skills shortage is threatening the very companies that are likely to be disproportionately responsible for the UK’s future growth.

Amongst those SMEs that have not been able to access the relevant skills, almost a third (32%) claim that they have been unable to grow their business due to the skills shortage.

As CYBG’s Index shows, the net balance of SMEs operating below capacity increased in Q4 2017 largely as a result of the UK’s tight labour market where the unemployment rate is at a historically low 4.4% and employment at a record 75.2%.

SMEs call for incentives and tax cuts

To help address these challenges, SMEs surveyed in the YouGov poll have identified a range of changes that could help alleviate the strain of rising business costs – around 20% of all SMEs believe that either a cut in VAT or further Corporation Tax relief would deliver the biggest benefit in the current climate.

While the Government has already made changes to business rates to support SMEs, 20% of SMEs employing up to 100 people state that further business rate relief could help most to alleviate the pressure of increased costs (compared to just 11% of larger SMEs – 100-249 employees).

On skills, almost 40% of SMEs said that an incentive for employers to invest in existing employee training could help bridge current skills gaps. An equal amount suggested corporate tax incentives for training.

Among the smallest SMEs employing up to 20 employees, 42% say they would like to see an increased personal tax allowance for individuals investing in their own training and skills development.

References

1. The Index includes measures that can be directly linked to SME performance, as well as components that relate to the wider economy. A score of 100 would indicate maximum improvements across the SME Health Check Index’s eight indicators (business costs, capacity, employment, GDP, lending to SMEs, net business creation, revenue and SME business confidence).

2. The SME Health Check Index fell from 48.4 in the third quarter of 2017 to 42.0 in Q4 2017

3. Average UK gross salary was £29,009 in 2017, according to the Annual Survey of Hours and Earnings (ASHE)

4. There are 5.7 million private sector businesses at the start of 2017 – Business Populations (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/663235/bpe_2017_statistical_release.pdf ), 30 November 2017

SOURCE CYBG

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55 per cent of UK SMEs unable to access all funding needed to grow

Research from Liberis, a leading small business finance provider, published today, 21st February, revealed that over half of UK businesses are unable to access the funding needed to grow; with the main hindering factor being a lack of education or understanding of their funding options. With falling SME confidence in the economy and mounting concerns over costs given the relative weakness of the sterling, Liberis strongly urges the UK to better support its small business community.

The lifeblood of the UK economy, SMEs contribute more than £200bn a year; with this number expected to grow by almost 20 per cent by 2025. Yet, without a vital cash injection, this 2025 vision will be severely stinted.

Hindering growth opportunities, this lag in SME development may in turn negatively impact the economy. Liberis therefore believes it is crucial to ensure better understanding on how to navigate the perceived minefield of funding options. Small business education is desperately required to increase awareness levels of the process; greatly benefiting both businesses and economy alike. Such movement has been reinforced in a recent report from the British Business Bank, in which the UK Government backed organisation pledges its dedication to a more targeted educational campaign on the topic of SME finance.

While 62 per cent of UK SMEs said they need funding to grow and expand, but 57 per cent of SMEs were unsure which provider to obtain funding from and 53 per cent did not have a set amount in mind when looking to access finance.

Liberis found 22 per cent of businesses require funding to maintain business as usual, while 5 per cent need funding to survive past the first year of business. Speed of funding has been identified as integral to achieving this growth. Other findings of the report showed an increase in the popularity of crowdfunding as a source, with 10 per cent of UK SMEs looking to use this as a means for funding in the next two years.

Commenting on the report, Rob Straathof, CEO at Liberis, said: ‘These findings have opened our eyes to a lack of confidence and awareness among SMEs in how to correctly secure the funding they so desperately need. Funding will continue to be a hot topic for the small business community, but urgent action and collaboration is crucial to prevent resulting damage to the UK economy. Without sufficient financial education and support, the UK’s business ambitions will be severely affected but by ensuring they have the correct financial understanding, we can help secure and strengthen their livelihood; fast-tracking their ambitions.’

Source: London Loves Business