Small and medium-sized enterprises (SMEs) in the UK are losing out on important business prospects due to a lack of access to finance, according to the recently released
Future attitudes report from Aldermore Bank, cited by
Startups’ Henry Williams. “The average UK business is missing out on around £77,651 every year in missed opportunities,” writes Williams.
Some 32% of medium-sized firms (50–249 employees) have been unable to pursue a new business opportunity as a result of limited financing, followed by 28% of small companies (10–49 employees), 15% of micro-businesses (less than 10 employees) and 9% of sole traders.
More than two-fifths of small companies say achieving growth is their key priority for 2017, says Carl D’Ammassa, group managing director of business finance at Aldermore, who is quoted in the article. “It is frustrating to see that so many firms are missing out on business opportunities due to a lack of appropriate funding.”
According to the report, which surveyed over 1,000 firms across the UK, 18% of businesses use “traditional bank lending” for funding, while alternatives such as “asset and invoice finance” make up 14% of funding for small firms. An increasing number of companies have turned to asset finance to develop a “cash cushion” as a result of “financial instability” following the Brexit vote in June 2016, says Williams, citing Asset Based Finance Association (ABFA) data. According to an ABFA study, the share of asset-based finance extended to businesses has risen by 13% over the past year to a record £22.2bn – 7% of this growth was recorded in the last quarter of 2016. Invoice finance accounted for 80% of this total, with the remaining 20% consisting of asset-based lending.
“All sizes of UK businesses need to be aware of the possibilities and opportunities that asset based finance can provide them, beyond what traditional sources can often offer them,” says Jeff Longhurst, chief executive of the ABFA, who is also quoted.
Startups article
Pay up to scale upPoor funding is also standing in the way of SMEs’ ability to scale up and export products and services. According to John Williams, head of the Association of Chartered Certified Accountants (ACCA) UK, writing for
The Huffington Post UK, “only 5% of UK SMEs currently export”.
£77,651
The amount that the average UK firm is losing out on every year due to missed business opportunities
The Government’s Industrial Strategy recognises the need to scale up UK firms over the next few years, as well as expand export markets, but adequate financial support will be crucial in this endeavour. Supportive measures could include “a non-payment insurance product (to remove some of the risk of expansion), better education for banks about SME risk and lending covenants, and further research into non-traditional financing options, such as non-bank lenders,” says the ACCA’s Williams.
And the private sector also has its part to play. “It is UK employers that will take apprentices and bridge their technical skills gaps, invest in and utilise cutting-edge technology, and ultimately create the robust workforce that will enable SMEs to scale-up operations.” This, in turn, will result in improved profits and better tax receipts.
The Huffington Post UK article
Cash flow conundrumsBasic cash flow issues, too, are standing in the way of SME growth and prosperity, and this is primarily the result of late payments, says Faye Cook, a solicitor at Thomson Snell & Passmore, writing for
Real Business. According to BACS research, which is cited in the article, UK SMEs are owed £26.3bn in overdue payments, with over half citing late payments as an issue.
“It appears that the UK has developed a culture of late payments, and it is clear that immediate action is required to address this situation,” says Cook. Traditional accounting models, which can slow down invoicing and collection, and an increase in credit offerings are largely to blame.
According to Cook, there are a number of measures SMEs should be taking to combat cash flow issues. These include streamlining the invoicing process and making use of new digital technologies; implementing a strict commercial contract or set of trading terms and conditions, and ensuring these are signed before goods or services are provided; carrying out credit checks; purchasing credit insurance; reducing or removing credit limits; and implementing harsher penalties on late payments.
The Government is also working on addressing this issue, through “a new statutory reporting duty for payment practices and performance, and the appointment of a small business commissioner”, says Cook.
While steps are being taken to improve prospects for SMEs, a significant increase in support, particularly in terms of improved access to funding, is necessary to adequately back the growth of this incredibly important UK business sector.
Real Business article
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