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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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A Quarter of Small Businesses Would Cut Staff if They Couldn’t Access New Finance

According to new research commissioned by ground-breaking financial utility, Saxo Payments Banking Circle, SMEs are facing potentially fatal challenges in accessing finance to support the growth of their business.

“Since the financial crisis began in 2008, mainstream banks have been less willing to lend, particularly to smaller enterprises and this has forced SMEs into an unfair fight for the finance they need to compete effectively,” explained Anders la Cour, co-founder and Chief Executive Officer of Saxo Payments Banking Circle. “Our research found that lack of access to additional finance would force 25% of SMEs to let employees go. Nearly a third (30%) would have to reduce prices to encourage sales and increase cashflow, and 39% would be unable to buy the equipment the business needs.”

Over 500 financial decision makers and directors in SMEs that have an online presence responded to the research commissioned by Saxo Payments Banking Circle. Almost all (92.5%) have accessed business finance within the past five years, but many have experienced difficulties in borrowing from their usual bank.

Interest rates and fees were the biggest concern, with 58% saying they would consider finance from a non-bank if it offered lower interest rates. 44% would do so for lower arrangement fees. 25% would be attracted to a non-bank by simple online account management.

The reason for SMEs going into battle for finance varies, but buying equipment was the most common reason why they needed extra cash – for 52.9% of SMEs. Purchasing inventory came in second place (34.5%), followed by expanding into new markets for 27.5%.

The most common type of finance used was a one to three year loan, taken out specifically for the purpose. The second most common type of finance was an overdraft. And, whilst likely to be more expensive than other finance facilities, 60% of SMEs with 10-49 employees said they had relied on their overdraft within the past five years. Without that essential facility they would have had to take drastic steps to cut costs.

Ability to access finance quickly is essential for small businesses working in a fast-paced market and trying to compete effectively. However, the Banking Circle research painted a worrying picture of the length of time firms wait to get their hands on the cash their business needs. Just 3% managed to get the finance arranged within a week. 33.3% took 1-2 weeks and 36.3% waited 3-4 weeks for the finance to be arrange. 2.1% of SMEs waited up to six months for their finance – a small percentage, but representing almost 120,000 businesses across the UK.

“SMEs play a vital role in the global economy, and anything holding them back from their potential could have a severe and far-reaching impact”, continued Anders la Cour. “The business landscape is changing, and traditional lenders are not able to keep up and meet the needs of SMEs. Only financial institutions willing to adapt to new market conditions, working with third-party providers in an ecosystem model, will remain competitive and successful in the digital age.”

Source: Bobs Guide

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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

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Small Businesses Are Optimistic About the Future

The overwhelming majority of small-business owners (84%) are confident in the future of their business, according to a new study produced by the National Small Business Association and ZipRecruiter. More than half (53%) of the 1,633 small-business owners surveyed said that their revenue has gone up. That’s the first time since 1997 that the majority of companies reported an increase. The results are largely encouraging, though owners weren’t without worry.

“In the past two years, the number of small-business owners who say they expect to see an economic expansion in the next year has more than doubled,” said NSBA President Todd McCracken in a press release. “Unfortunately, the ever-rising cost of healthcare remains the biggest challenge small businesses face.”

The state of small-business jobs

Jobs and hiring practices were a major focus of the report. One of the key findings — that automation does not necessarily mean fewer jobs — differs from what’s expected to happen at many large companies.

The survey showed that only 9% of the small-business owners who plan to implement some type of automation believe that doing so will allow them to employ fewer people. Almost 1 in 4 (24%) said automation will cause them to need more workers and the majority (67%) said it will not impact their employee count either way.

In addition, small-business owners believe that the gig economy will not impact how many full-time employees they hire. While 37% have added part-time employees, 70% of them were new hires, and only 17% were current full-time employees who were reduced to part-time.

The survey also had some good news for employees. Over half (58%) of small-business owners said they raised wages in 2017 and 64% said they expect to in 2018. Nearly a third of those surveyed (32%) noted that they were having trouble finding qualified applicants due to the tight labor department.

“We tend to think of corporate America when we think of career ladders, however small businesses have ample opportunities for career growth,” said ZipRecruiter Chief Economist Cathy Barrera in the press release. “66% of all small businesses offer opportunities for promotion, and at companies with more than five employees, that number rises to 85%.”

What does this mean?

Strong small businesses are good for the economy and good for workers. They give people options and create opportunities that otherwise may not exist.

In order to continue this strong market for small business, it’s important that the government address healthcare. That was named by 32% of those surveyed as their biggest challenge to their future growth and survival. That was tied with economic uncertainty and followed by lack of qualified workers at 26%.

Still, despite those concerns, small business is thriving and confidence among owners is high.

Source: Yahoo Finance UK

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British banks simplify SME account opening process

A group of British banks have come together to simplify the account opening process for small businesses, working with trade body UK Finance on a checklist of details and documents firms will need for their applications.

A Competition & Markets Authority investigation into the retail banking market recently identified the account opening process as a barrier to switching for some small and medium-sized businesses.

In response, 18 business bank account providers have standardised the basic set of information that they require customers to provide when opening or switching an account.

Working with the banks, UK Finance has created an online guide, including a streamlined checklist, outlining the essential details and documents that most small businesses will need when applying to open an account.

Anne Pieckielon, director, product and strategy, Bacs, says: “said: “As operators of the Current Account Switch Service, we welcome today’s announcement and believe it is another important step towards simplifying the account opening and switching process.

“We know that small business owners are busy enough without the need to deal with further layers of time-consuming admin which, in many cases, could deter some from getting the very best deal from their business account.”

Source: Finextra
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Brexit fear greatest among innovative SMEs

THE most innovative and “economically important” small and medium-sized firms in the UK may be hit hardest by Brexit, new research warns.

The study, from the University of St Andrews, notes Brexit is viewed as likely to result in lower levels of capital investment, reduced access to external finance, lower levels of growth, reduced product development and lower levels of business internationalisation for small and medium-sized enterprises (SMEs).

The research has found concerns about Brexit are not felt uniformly across UK SMEs. The university says the results suggest Brexit-related uncertainty is likely to affect larger, export-oriented firms in the SME bracket and those in hi-tech and service-related industries most. And the study notes innovative SMEs “seem particularly concerned by Brexit”, and may be the most negatively affected.

SMEs based in Scotland and Northern Ireland view Brexit more negatively than their counterparts in England and Wales, the research has found.

The University of St Andrews notes this in part mirrors the “differentiated voting patterns” across the UK in the June 2016 European Union membership referendum.

Ross Brown, reader in entrepreneurship and small business finance at the university, declared reduced capital investment “critically weakens and undermines” SMEs’ ability to grow and prosper.

Source: Herald Scotland

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SMEs optimistic about obtaining finance in 2018, report shows

A report from retail bank Aldermore has shown small and medium-sized businesses are optimistic about obtaining finance over the next year.

The Aldermore Future Attitudes report surveyed more than 1,000 business decision-makers across the UK. They found 75 per cent are confident they will be able to access funding to achieve their growth ambitions, up from 63 per cent in Q4 2016.

Positive

The report also showed businesses are positive about their revenues, with more than 40 per cent expecting their revenues to increase over the next 12 months, compared to 39 per cent in Q4 2016. Eleven per cent of respondents said they are expecting their profits to increase significantly over the next 12 months.

Business owners also revealed how they plan to achieve revenue growth, with 50 per cent planning to boost their marketing efforts. 38 per cent are planning to launch new products, and 33 per cent say they will boost profits by entering new markets.

Crucial

Commenting on the report, Aldermore Group Managing Director of Business Finance Carl D’Ammassa said it’s encouraging that optimism among SME leaders is increasing, with attitudes towards business revenues positive for the next 12 months.

He added SMEs make an essential contribution to the economy and with Brexit progressing, their ability to get finance and help support the economy is crucial.

Source: LSBF

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FSB launches new FinTech platform to fund small business growth

A new FinTech platform regulated by the FSA launches today (10 January) aiming to help further the success of the UK’s small business and self-employed communities amid the findings of latest research that the cost of doing business in the capital is stifling small firms.

Access to finance is crucial to the small business sector which accounts for an annual turnover of £1.9 trillion a year – 51 per cent of all private sector turnover in the UK.

The FSB Funding Platform, developed by Finpoint, uses intelligent matching technology to match applicants with over 100 finance providers.

A pilot of the platform for FSB members in three UK regions shows that the average amount of finance a small business applies for from an alternative finance provider is £39,000 – half the amount sought from banks’. With 40 per cent of small businesses seeking alternative finance for equipment purchases and 40 per cent for working capital to fund short-term operations or cover late payments.

FSB’s London Chair, Michael Lassman said:

“We’re so pleased to be able to offer this exciting platform to our member base. Although it’s harnessing the latest innovations in tech it offers a very simple way to access finance, as well as access to human financial advisers. It will transform the business funding market and is a real step change for small businesses.”

Finpoint Managing Director Guy Bridge explained:

“We saw not enough transparency in the market, and we remain motivated by how we can use technology to provide an efficient service, but perhaps most importantly, we were keen on providing high quality customer service, which means any one of us may be on the phone when you call us up with a question about your funding needs. We quite like the label “FinTech”, because it is a mixture of Technology and Financial Services, with a heavy emphasis on “service.

“We’re thrilled to have been awarded the contract to provide FSB’s funding platform. As a small business ourselves – and a member of FSB – we get what’s needed, how small business would like to use the platform and we’re truly excited.”

Source: London Loves Business

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Small businesses enter 2018 full of hope

Three quarters of medium and small businesses are confident they will be able to access the funding they need to grow their business over the next 12 months, according to the Aldermore Future Attitudes report.

This result for the fourth quarter of 2017 was an increase from the same period in the previous year when only 63 per cent felt this way.

The report, which surveyed over a thousand-business decision-makers across the UK, found that business owners are also more confident that their revenues will rise over the coming year.

The methods of securing this growth vary with half planning to increase marketing efforts, just under two fifths – 39 per cent – launching new products or services, and a third entering new markets.

Carl D’Ammassa, group managing director for business finance at Aldermore, said: “It is encouraging to see that optimism amongst SME leaders is increasing, with attitudes towards business revenues staying positive for the next 12 months.

“SMEs make an essential contribution to the UK economy and with Brexit discussions progressing, their ability to obtain finance and help support the growth of the UK economy will be crucial.

“Planning can be a difficult task, but to ensure ongoing success, every business owner needs to have a vision for growth and an understanding of how they would like to get there.”

In total, more than two in five SME owners think they will see an increase in their revenues, compared to 39 per cent in Q4 2016, with over one in ten – 11 per cent – of bosses expecting to see a significant increase in profits over the next 12 months.

Source: FT Adviser

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Aldermore reports growing financial confidence among UK SMEs

Small and medium-sized businesses in the UK are increasingly confident they can source the funds needed to drive growth in 2018, new research shows.

The latest Aldermore Future Attitudes report reveals that three-quarters (75%) of SMEs, representing more than four million companies, are confident that they will be able to access the funding they need to grow their businesses over the next year, compared to 63% in Q4 2016.

A total of 42% think their business’ revenues will increase over the coming 12 months, compared to 39% for the same period last year, despite the ongoing uncertainty of Brexit negotiations.

Half of business owners who are expecting an increase in business revenues over the coming year plan to make this happen by increasing marketing efforts.

Carl D’Ammassa, group managing director, business finance, at Aldermore, said: “It is encouraging to see that optimism amongst SME leaders is increasing, with attitudes towards business revenues staying positive for the next 12 months.

“SMEs make an essential contribution to the UK economy and with Brexit discussions progressing, their ability to obtain finance and help support the growth of the UK economy will be crucial.

“Planning can be a difficult task, but to ensure ongoing success, every business owner needs to have a vision for growth and an understanding of how they would like to get there.”

Source: Asset Finance International