News Article

Bank Lending

Scottish SMEs failing to match funding to growth aspirations

By CreditMan Monday, August 18, 2014

Despite the buoyant mood of small and medium-sized businesses (SMEs) in Scotland as confidence levels are restored and more than two thirds (69%) of owners predict ‘significant’ growth, a new report from Bibby Financial Services reveals that when it comes to seeking finance for their business, SMEs are failing to shop around.

The SME Sentiment Scotland report shows that nine in ten Scottish SMEs claim they are not looking for external funding in the immediate future - even though more than half (54%) are planning to invest in their business over the coming months. Of those planning to invest, a considerable 72 per cent state they will fund investment using their own money, rather than seeking external finance.

Alan Anderson, Head of Sales at Bibby Financial Services Scotland said: “Our research begs the question of why Scottish SMEs are not proactively seeking alternative forms of finance and shopping around for the best deals – particularly when so many are planning to invest in equipment and recruitment over the coming months.

“The danger is that SMEs could actually be inhibiting their growth prospects and stifling jobs creation in the future by failing to investigate external finance now.”

Of those SMEs who do use external funding to grow their business most are not looking beyond traditional bank lending and overdrafts. The funder’s research shows that some 79 per cent rely mainly on bank loans and overdrafts to finance their expansion plans – despite the fact that different forms of finance including invoice finance could serve them equally well.

A separate report by the Enterprise Research Centre (ERC) to Scottish parliament, argues that alternative forms of financing are not used by SMEs due to lack of availability, awareness, financial expertise and confidence.

Alan Anderson added: “With 58 per cent of Scottish owners and managers relying heavily on their accountants for business advice, it is clear that these professionals have a crucial role to play in helping businesses with key decisions such as how to structure their finances and fund their growth.

“The traditional banking model is no longer able to meet the complex and varied funding requirements of growing SMEs. It’s vital that owners shop around and ensure they have the information they need to make the most suitable funding decision for their business - and that they can take advantage of the benefits of alternative, non-bank finance.”

Bibby Financial Services’ SME Sentiment Scotland report can be downloaded at: