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SMEs and Alternative Finance

Research has shown that in the coming year, more and more SMEs will be abandoning traditional means for funding in favour of alternative routes to finance.

The RSM Tenon Business Barometer surveyed the senior management  of many small and medium businessses, and showed that just over a third of them will be looking outside the traditional means of finance when they’re looking for funding. Instead, asset based lending, invoice finance, grants and even selling off business assets will be key routes to finding that extra money for growth and recovery.

Around 17% of those interviewed believed they would be raising finance through bank loans. A further ten percent were looking to use invoice finance in order to boost their cash flow and counter late payment problems, without their company taking on new debt. This form of alternative finance lets businesses borrow money against unpaid customer invoices, helping to release cash that might otherwise be unreachable for months.

Many other businesses said that they were looking to asset based lending, which included borrowing against stock, plant and machinery. However, 55% said that they weren’t looking to raise any extra finance over the next eighteen months.

Many businesses are looking to pay down debt rather than invest more, which is shown in the number of compnaies that will not be looking for finance this year. This is shown in the low demand for bank finance, despite pressures on the banks to lend more to SMEs.

There’s an additional twist, however, as those companies who are struggling may be put off from applying for finance as they believe that their bids will be rejected. This could well be the case when it comes to bank finance, with many businesses looking tothe traditional sources for new funding being unsuccessful, but this isn’t necessarily the case for alternative means of funding.

 

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