As we are all returning to the office after the celebrations, there may be a whiff of the post-holiday blues in the air (or is that the remnants of a New Year’s hangover?), but there is always a hint of a fresh start.
New year, new Government – new hopes that we may be finally able to put Brexit to bed and begin to erase the word “uncertainty” from our economic vocabularies. Though we aren’t out of the woods just yet, it does certainly feel like there is the hope of forward movement after close to four years of parliamentary infighting and instability.
In our last blog, we talked about how many people launch a business venture in the first quarter of a New Year, and even if your business is well-established, the start of a fresh calendar year for many is about assessing and setting goals. For many, achieving growth is the number one priority. But simply wanting growth isn’t always enough to actualise it.
A healthy mix of optimism and realism, and turning intention into action is what is required to realise growth objectives and seize opportunities – and, of course, there’s the small matter of SMEs being enabled to access finance.
Lack of finance for SMEs can mean a lack of growth
Research shows that while 38% of SMEs have accessed bank loans to fund their business growth, the majority of these are the larger, more established firms. Micro SMEs (businesses with fewer than 9 employees) are far less likely to access bank finance. Only 25% of micro SMEs have used bank loans to fuel business growth, compared to more than half of businesses with over 100 employees.
Smaller businesses are also less likely to be successful when applying for finance in their critical early growth stage. 37% claim they have been refused credit during their first 2 years of trading, leaving businesses with a chicken-and-egg-style dilemma where they need funding to grow and to demonstrate growth to access funding.
Lack of SME funding equals slowed progress in scaling up
Expanding into new markets, product development or process improvement may be on the cards for many businesses for 2020, but these advances don’t come for free. All of these objectives take access to working capital that many SMEs just can’t get their hands on.
SMEs are far less likely to achieve access to finance in their early growth stages, and this can make the transition from small to medium-sized business a feat of logistics. It doesn’t matter how strong the ambition, how relentless the entrepreneurial spirit, how fantastic the product or how much need there is for it in the market, if the access to funding isn’t there the bird isn’t going to fly.
Business owners can often turn to using personal savings and assets, obtaining personal loans or overdrafts to pour into their business and fund expansion or see their enterprises through cash flow difficulties.
We believe that lenders have a duty to ensure they are creating a fertile environment for SMEs to flourish, to keep our economy buoyant and demonstrate Britain’s resilience and mettle.
With so much political and economic uncertainty still to come, as economists offer wildly varied predictions for our longer-term financial future under this Conservative government and as we exit the EU, it’s more important than ever that SMEs protect their financial agility and cash flow. Don’t allow this continued period of uncertainty to hold you back from expansion, investment and making and reaching growth targets.
The lenders aren’t solely to blame
In our experience, many SMEs and startups assume that their business is not eligible for finance, or if they have been refused funding by banks they believe that’s it and that avenue is now closed for them.
Another recent study by Liberis showed that more than half of SMEs miss out on opportunities because they believe they do not have funding opportunities available or that relying on funding would undermine their efforts to build a sustainable business.
The reason this is an issue that must be overcome is that it decelerates business growth. Affordable funding can assist your business in taking advantage of opportunities, managing cash flow issues, managing inventory and strengthening negotiation positions with suppliers. Cash can also enable you to invest in talent, product, equipment or business process improvements.
Although our economic landscape has created a less forgiving lending culture, funding options are definitely available. The growth of alternative finance has given SMEs more options than ever on managing cash flow.
You need money to make money
SMEs are the lifeblood of our economy, and cash is the lifeblood of all businesses. At Partnership Invoice Finance our business is helping your business retain control of your cash by using your sales ledger to release working capital.
Through offering a selection of invoice financing services including invoice factoring or invoice discounting, we can help your business by either managing your entire sales ledger on your behalf or by advancing capital on single or select invoices by arrangement
Our business is designed around supporting your business, maximising your cash flow, and helping you actualise the growth trajectory you dream of. No longer needing to rely on banks and potentially expensive loans and overdrafts, finance for SMEs and Startups is available in the form of releasing cash tied up in unpaid invoices virtually as soon as they are raised.
For more insights into the importance of SMEs’ access to finance and how cash flow lending could the answer you are looking for, follow us on Twitter.