Access to funding is perceived to be an uphill struggle by many of the UK’s SMEs according to new research commissioned by commercial finance broker Hilton-Baird Financial Solutions. Only 12% of SMEs questioned in the first ’SME Trends Report’ had secured new external funding over the past six months and the study also uncovered a worrying increase in reliance on unconventional routes to finance.
While bank overdrafts remains SMEs’ preferred method of accessing funds, with 41% of the sample saying they’d used this source over the past six months, 35% of the sample admitted to using credit cards as a means to meeting their working capital needs. Loans from friends and family were also high on the list of fund-raising methods with 23% opting for this route.
This risky business practice clearly indicates that SMEs are still feeling the impacts of the recession. Confidence has been slow to return and appears to have forced more and more SMEs to pursue potentially risky short term strategies to keep cash flowing thereby possibly putting themselves and those closest to them, under longer term pressure.
Evette Orams, Managing Director at Hilton-Baird Financial Solutions comments: “During the early days of recovery, identifying the right type of flexible funding to keep on top of day to day demands can prove challenging and, with late payment and bad debt potentially continuing to be an issue, life can still be extremely testing for businesses of all sizes.
“It’s inevitable that when faced with strained cash flow, SMEs will seek alternative methods of gaining access to funds– but they would do well to steer clear of short term, costly and inflexible methods, such as credit cards, which could offer more long term risk than reward.” She continued.
Hilton-Baird suggests that SMEs consider using alternative funding methods such as invoice finance, which allows companies to access cash quickly and easily against their sales ledger. Invoice finance can assist with late payment issues as it often incorporates up to 120 days funding from invoice date and can potentially include non-recourse options to incorporate debtor protection to guard against failure or protracted default. Additionally, factoring can incorporate a dedicated credit management function to remove the burden of having to chase customers for payment. By adopting a more “hands on” approach to cash flow management and tackling tough risk management issues head on, SMEs can navigate their way around potential pitfalls and align their business for success in the months to come.
To find out more about Hilton-Baird Financial Solutions call 023 8070 7390 or visit www.hiltonbaird.co.uk
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Note to editors:
Evette Orams is Managing Director of Hilton-Baird Financial Solutions, which is part of the Hilton-Baird Group of companies. As an independent business introducer, Hilton-Baird’
