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Bank Lending

Businesses condemn funding support

By CreditMan Monday, October 27, 2014

Exactly half of the UK’s businesses believe that the level of funding support that’s currently available is inadequate, according to new research conducted by independent commercial finance broker, Hilton-Baird Financial Solutions.

Only 27 per cent say that the backing from lenders and the government is sufficient.

The annual SME Trends Index questioned business owners and finance directors on a range of issues surrounding their funding, and additionally found that 16 per cent had seen at least one funding application rejected in the past 12 months. However this figure is as high as 26 per cent amongst businesses with an annual turnover of less than £500,000, as the country’s smallest companies continue to struggle to access the funding they require to grow.

When questioned on current funding methods, figures showed that those relying on bank overdrafts may not be accessing adequate working capital to meet their needs, with 61 per cent of overdraft users also using business credit cards.

There remains a worryingly high reliance on credit cards overall. The use of business credit cards was up 2 per cent annually to 47 per cent, while personal credit cards are used by 12 per cent of respondents. This figure is as high as 20 per cent amongst firms turning over less than £500,000.

Meanwhile, 50 per cent of respondents said their bank manager is their first port of call when searching for new funding. A further 26 per cent rely on their in-house expertise and 23 per cent research their options online. Interestingly, less than one in five (19 per cent) speak to an accountant, with even fewer contacting an independent finance broker (13 per cent).

Asked what they are looking for when reviewing their business's funding, cost was very much the key driver (57%). Almost a third said that they were seeking additional levels of funding, with 23 per cent stating that greater flexibility was required.

Evette Orams, Managing Director of Hilton-Baird Financial Solutions, said: “It is worrying that SMEs aren’t accessing the funding support they need. As the lifeblood of the economy, they are key to its recovery.

“In addition to SMEs feeling that adequate support is not available, it would appear that they are resorting to using financing methods that are inflexible, potentially costly and only suited to the short term.

“Funding remains available to businesses of all sizes if they explore the right avenues, but it isn’t a one size fits all offering so care must be taken to ensure the right facility is secured.

“Solutions that provide the right level of service and support, plus the flexibility and headroom to grow in line with the business, can give SMEs the freedom to reach their potential. Whilst cost is of obvious importance, focusing instead on the value the facility would drive to the business is key.”

Phil Orford MBE, Chief Executive of the Forum of Private Business, said: “The research supports other recent data that suggests many small businesses feel they do not have the support they need to take advantage of the growth opportunities available.

“Businesses need to have access to more information about the current finance support schemes, and to more comprehensive advice on the alternatives available. Lenders, and banks in particular, need to convince small business owners that they are here to provide support for those looking to grow and employ. Without clearer support and positive action, this could remain a significant obstacle to business confidence and securing a sustainable recovery.

“A focus on stimulating further economic activity and growth is needed. It is vital that lenders take further steps to be more proactive in providing the liquidity businesses need rather than seeing further increases in the use of credit card finance.”