Confidence To Go For Growth

As 2013 comes to an end, is there a spring in the step of small business owners, or are they struggling to find their feet in this cautious economic climate?

1st December 2013 at 8:53 pm

A snapshot view of SMEs thoughts and fears

As 2013 comes to an end, is there a spring in the step of small business owners, or are they struggling to find their feet in this cautious economic climate?

According to several recent surveys monitoring business activity, the UK seems to be pointing in the right direction and showing encouraging signs of economic growth. The latest Office for National Statistics (ONS) Annual Business Survey reports that £11.3 billion of extra income was generated by UK businesses between 2011 and 2012, indicating that commercial activity is improving. Added to this is some welcoming news from the Labour Market Statistics show that the latest employment figures is up 177,000 on the quarter from April to June 2013, to reach 29.95 million.

To get a better picture of what is happening on the ground with SMEs, the Bibby Financial Services report makes for some interesting reading. Three consecutive quarterly surveys this year of 1,450 SMEs by Bibby found that nearly a third of business owners have seen an increase in orders in Q2 which was up from 24% from Q1 whilst 40% of respondents said they have seen an increase in new customers in Q2 again up from 38% in Q1. The figures have just been released for Q3, which again shows an increase in new customers, up to 42%, and an increase in orders, up to 30%.

Against this positive outlook, small businesses are finding the lack of capital and access to credit to expand their business still remain an overriding issue. There has been alot of the political and media focus on the poor record of bank lending to SMEs and how the system is failing. It’s probably still early days to evaluate the success of Government initiatives, such as the Funding for Lending Scheme (FSL) and the creation of a Government-backed business bank, announced last September by the Business Secretary Vince Cable. The new bank aims to attract private sector funding so that when fully operational, it could support up to £10 billion of new and additional business lending.

So it comes of no surprise to learn from the Bibby’s research that three out of four small businesses have been rejected for funding by banks. Generally, confidence in the government and its policies remain low among SMEs, with only six per cent out of managers and Directors surveyed saying the Government-backed business bank would benefit their company.

However, there are a number of alternative finance sources and solutions that are starting to fill the gap for the supply of capital and are attracting a growing number of SMEs to move away from the traditional routes.

SMEs have a diverse range of funding requirements whether it is for short- or long-term needs, which include product development, export, distribution, marketing and sales, capital expenditure for manufacturing and equipment and site roll-outs.

Commercial brokers can play a vital role in helping small businesses find the most appropriate source of funding, such as for bridging finance, vehicle finance, invoice finance, commercial mortgages or equipment finance.  

There are a range of other finance and seed funding options, such as crowdfunding, government grants and loans, private equity, asset-based lending and business angels.

Already mentioned is invoice finance, which may offer a smart and popular way of improving cashflow problems. As so many small businesses and startups know only too well, it is a big challenge to access finance when cashflow is being squeezed, often as a result from late payments. Invoice finance is one way of freeing up cash flow by releasing existing funds, which are tied up in invoices and is able to provide a steady flow of cash without a small business having to take on more debt, and could be a business lifeline.

The environment in which SMEs operate seems more encouraging as more support networks are created and a greater choice of funding sources are being made available. This should make it easier for business owners to take a more strategic approach in growing the company.

For small businesses and startups getting the balance between the right support and the right type of financing at the right time is not easy. Yet, it is crucial that they make the right decisions and take the right steps towards building and growing a successful business.

Jane Tchan

Jane Tchan is editor of SmallBizPod. She has more than 30 years of experience gained from working across a diverse range of industries, including tourism and leisure, retailing, sports sponsorship and food. During that time she has edited a variety of publications and online media

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