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Bank Lending

Invoice finance and asset finance users performing best

By CreditMan Tuesday, February 11, 2014

With traditional business finance in increasingly short supply, one in five British businesses are being driven to seek loans from family and friends in search of a cash flow boost, according to new research.

The latest SME Trends Index conducted by commercial finance broker Hilton-Baird Financial Solutions found that 19 per cent of SMEs were using money borrowed from their family and friends to fund their activity. This represented an annual increase of eight per cent and underlines the challenges that many continue to face.

Almost one in four of those that do stated that an inability to access funding was their primary concern for the coming six months, and, when reviewing their existing finance arrangements, 56 per cent are most looking for additional funding.

Business lending has dominated the news agenda for many months now and, despite a number of government initiatives, traditional lending to small businesses through overdrafts and bank loans continues to decline.

Although many look to friends and family, others are turning to less traditional lending solutions for a financial boost. Hilton-Baird's research also found that the use
of asset finance [http://www.hiltonbaird.co.uk/FS/Business-Finance-Solutions/Asset-Finance
] and invoice finance [http://www.hiltonbaird.co.uk/FS/Invoice-Finance ] both increased on an annual basis amongst SMEs, and it was these businesses who were performing best as a result.

While 48 per cent of the business owners and finance directors questioned reported a rise in turnover during the preceding six months, this figure was as high as 56 per cent for users of both invoice and asset finance solutions.

Evette Orams, Managing Director of Hilton-Baird Financial Solutions, said: "The downward trend of traditional business lending can be seen both as a negative and positive. On the one hand many businesses are being starved of vital funding, but on the other it is driving businesses to look at other, arguably more suitable, funding methods.

"Although it is a concern that one in five businesses have borrowed from family and friends, it is encouraging to note that the use of invoice finance and asset finance has increased. These solutions can be extremely beneficial, often more so than a simple overdraft or bank loan, as the funding that can be accessed grows in line with the business and can include features to support and protect the business as it grows.

"As more businesses start to recognise these benefits, this trend will surely continue and 2014 could be a big year for the asset based finance industry, and for those businesses in search of a cash flow boost."