SMEs struggle to access finance in wake of recession
More than half of SMEs have a poor performance record as a result of the recession Two thirds feel penalised by finance providers because of poor recession trading Three quarters of SMEs have seen turnover fall in the last 12 months
ABN AMRO Commercial Finance Managing Director Peter Ewen, comments: “Many good businesses suffered tough trading during the recession, but when this starts to affect access to finance it is a big problem.
“Most traditional lenders are still assessing businesses based wholly on their past performance, but this approach is increasingly irrelevant today.”
Because of the difficult environment, more than four fifths (83 per cent) of businesses say they have experienced poor cash flow in the last 12 months, whilst three quarters (76 per cent) have seen their turnover fall in the same period.
As a result nearly two thirds (63 per cent) say that their balance sheet looks weak. Over half (57 per cent) of businesses have also paid suppliers late in the last 12 months.
Light at the end of the tunnel
Despite damage caused by the difficult economic environment, nearly a third (30 per cent) of business owners say that their company’s poor trading during the recession does not reflect its potential today.
Two fifths (41 per cent) of respondents say that a backwards-looking assessment of their financial position fails to acknowledge their current activity and underestimates the future potential of their business. In fact, the majority of SMEs (83 per cent) expect their performance to improve next year.
Getting off the ground
But this optimism may be short lived if businesses fail to access the finance needed to support growth.
Nearly half (44 per cent) of SMEs are worried that their poor trading record will prohibit them from accessing finance.
Two thirds (66 per cent) of SMEs report that they have been discouraged from seeking an overdraft as a result of their poor trading during the downturn and 30 per cent from seeking any form of finance at all.
In spite of this active discouragement, eight out of ten (83 per cent) of the businesses questioned have applied for an overdraft anyway, though more than half (55 per cent) had their applications turned down. A third (32 per cent) even state that their bank’s attitude has discouraged them from pursuing growth altogether.
Peter Ewen comments: “We can’t miss this opportunity to support businesses just when they need it most. If SMEs aren’t able to grab growth opportunities when they arrive, then the finance industry has failed them.
“We need to take a long hard look at alternative finance available and the way in which businesses are being assessed for that funding. If we restrict businesses for surviving the global economic meltdown, then the future of British business is bleak indeed.”
For further information or an interview with Peter Ewen, please contact:
Xenia Kingsley or Lauren Greatorex at Man Bites Dog
0844 561 1416
About the ABN AMRO Commercial Finance study
The research was conducted amongst 250 SME owners, managers and financial controllers by Coleman Parkes on behalf of ABN AMRO Commercial Finance. The research was conducted online in August 2012.
About ABN AMRO Commercial Finance PLC
ABN AMRO Commercial Finance is an award-winning Invoice and Asset Based Lender and part of the ABN AMRO Commercial Finance Group. Established in 1989, the company provides Factoring, Invoice Discounting, Export Finance, Structured Finance, Asset Based Lending and numerous related services to start-ups through to £500m turnover organisations. Providing consistent support via its 200+ staff and 11 regional offices, ABN AMRO Commercial Finance helps clients manage working capital, refinance, restructure, fund business opportunities and expansion, purchase new equipment and finance M&As.
About the Overdraft Scrappage Scheme
ABN AMRO Commercial Finance launched a £250m Business Overdraft Scrappage Scheme in November 2012. The scheme has made £250m worth of funding available to encourage SMEs to scrap their overdrafts in favour of invoice finance.
Under the scheme, SMEs are able to trial a finance facility for 6-months with no-commitment to determine whether it is right for their business.