2013 was an extremely positive year for small business growth in the UK, with a record number of entrepreneurs launching companies and experiencing success. However, while SMEs were able to reap the benefits of a more receptive economic environment, many still struggled to access growth capital and even more remained worried about their businesses cash flow.
A recent report conducted by short term digital lender for SMEs, Everline, polled more than 500 small businesses to discover the financial concerns standing in the way of growth.
It found that seven in ten respondents believed regular access to cash flow was essential in order to expand, yet for 29 per cent of these respondents a lack of cash flow had so far prevented them in putting growth plans into motion.
Furthermore, 23 per cent had put marketing campaigns on hold in an attempt to put aside money vital for survival should the economic growth in the UK falter. A further 28 per cent had been forced to come to an arrangement with suppliers which allowed them to make late payments due to cash flow restrictions.
While 18 per cent of respondents admitted to suffering a cash flow crisis at least once a month, it emerged that sole traders tend to be the worst off with 90 per cent claiming to have to deal with a cash flow deficit of up to £5,000 each month. The majority of businesses blamed late customer payments and seasonality for the issue, indicating that additional legislation must be put in place to help protect small businesses from factors out with their control.
Unfortunately, another piece of research highlighted the fact that small businesses often have nowhere to turn in the event of a sudden cash shortage. Data shows that more than half of the one in five SMEs which have applied for the Bank of England’s Funding for Lending Scheme (FLS) in the past two years have had their application rejected outright or are yet to hear back regarding feedback or further options available to them.
It is hardly surprising, then, that 43 per cent of the respondents for Everline’s report believe that accessing loans or credit is more difficult now than before the economic downturn in 2008.
The question, then, is whether 2014 will see SMEs given greater access to support and funding in the event of a cash flow crisis? The government has, on numerous occasions, voiced support for small UK businesses and has pledged to provide financial support wherever possible.
Chancellor George Osborne, in the Autumn Statement, pledged additional funding for the government’s Business Bank – the effects of which will probably be seen as this year progresses. However, with SMEs still claiming that access to credit and loans remains restricted, many will surely doubt that this finance will be used to support their companies.
Do you think there is a solution, in either legislation or within the banking sector itself, which could be implemented in order to offer greater support to SMEs in the event of cash flow crises?
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