Positive news from SMEs
There are some really positive signs that small and medium-sized enterprises (SMEs) might just be getting their mojo back!
Research done by Aldermore bank is suggesting that SMEs plan to spend an average of £111,175 on growth strategies, which equates to a whopping £633 million total spend for all UK SME businesses. From these SMEs, around a third of them will be planning on investing in new equipment for their business, as the main priority over the next 12 months for just over 50% is growing their customer base (Leasing World). This surge in confidence does come as a slight shock due to the cost of living crisis and supply uncertainty, but it is good to see that the UK’s SMEs are being positive and forward-thinking.
How are they planning to invest in?
However, from the same research there is a concern that SMEs may not be going about their investment in the most cost-efficient way. 37% of SMEs plan to dip into their own pockets to fund their investments, 11% using overdrafts and 10% using credit cards.
Alarm bells should start to ring as it is clear from the Aldermore study that people are simply not aware of specialist options to aid with their purchasing plans, as people are still using their own cash – even in a cost of living crisis!
Spread the word!
Turns out, around a fifth of businesses in the UK are unaware of finance options (Consultancy.uk), with an underwhelming 9% of small firms applying for finance in the first quarter of 2022, the lowest proportion since SBI records began. Also at a record low: the acceptance rate. 43%.
But the good news is that this prompted the UK’s largest business group to advise banks to refrain from “pulling up the drawbridge” on small UK businesses as it could prove to implement long-term damage to the UK economy. Since then, SMEs who have successfully been accepted for finance rose to 47.8% showing clear willingness from lenders to start supporting SMEs even more. There is a real hunger in the UK for business growth but there is an unfortunate knowledge gap between finance options and business owners, and it is down to everyone involved to try and close it.
So, how should you invest in your SME?
21.6% of SMEs said the biggest barrier to growth was accessibility to sustainable funding. Does that really surprise anyone? With things such as the cost of living crisis and supply issues, of course using personal finance would be unsustainable!
Tim boag, Group Managing Director of business finance at Aldermore states “it’s concerning that many SMEs are relying on products not designed for business use to fund their investments. Business leaders should explore specialist funding options designed with their specific challenges in mind, such as invoice finance or asset finance”. As stated before it is down to lenders, advisors, brokers and even equipment suppliers to do as much as possible to get the message out to business owners on viable options they can use!
The industry needs YOU!
Conclusion
It doesn’t take a professional financial advisor to realise that with all the options and help available to business owners, using personal capital is not the smartest decision when it comes to investing in the business. The issue seems to be however that business owners are simply unaware of not only the benefits of said options, but the fact they actually exist in the first place.
If you, or someone you know, is thinking about investing in their business with new equipment or general expansion, stop them in their tracks and do them a favour by introducing them to business finance options!
