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Lifting the Lid on SME Funding

The SME Finance Monitor survey has today published data that lifts the lid on the state of SME funding in the UK. Surprisingly, the outlook on funding was not entirely bleak with the majority of loan requests and overdraft extensions being approved in the final quarter of 2011.

Doom and gloom?

The independently conducted survey concluded that 79% of overdraft extensions were approved, and 63% of loan requests were also granted. This seems surprising given the prominence of SME funding issues in both the press and parliament.

Some background is needed here: there were far fewer applications in the final three months of 2011 than the equivalent time period in 2010. This may be because of the overwhelmingly gloomy outlook coming from many sectors.

Many business are put off from funding applications due to the expectation they will be unsuccessful. The survey found that business with fewer than ten employees felt particularly downbeat.

Alternatives

The 2012 Budget will detail George Osbourne’s long awaited credit scheme for SMEs, although this scheme has already been hit by delays. However, Downing Street remains positive about its unveiling later this month.

There are also some entrepreneurs who are stepping into the funding void. New banks such as Aldermore specialise in lending to SMEs, and have tailored packages that may be more favourable than those offered by the big banks.

Equally, new business models have become increasingly successful. The Funding Circle pools the money of its investors, who can specify which SMEs that they lend to in order to maximise their return.

The Funding Circle has lent more than £25 million since it was founded in August 2010. With pay outs averaging around £40 000, this adds up to a lot of approved loans. It is however picky about the SMEs it deals with, and with so many companies in need of funding £25 million is fairly small fish.

Factoring and invoice discounting have been tipped to grow in 2012, and are excellent ways to get business funding during such a competitive time.

 

Select Factoring

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