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Loan Drought for SMEs

The current loan drought for small businesses seems to be getting more acute according to a recent survey on the country’s SMEs. This is stopping many companies from investing in new equipment and employing new staff, hurting any potential for growth within the small business sector.

BDRC Continental’s quarterly SME Finance Monitor found that just 43% of SMEs used external finance compared with 51% three months earlier – this shows banks are turning down more small businesses who are finding it more difficult to access funding from outside sources. Indeed, a third of businesses that applied for loans and a fifth of those that applied for overdrafts were turned down.

Small businesses have also said that this is causing them to lose confidence in their ability to secure funding – confidence among firms that banks will sanction further overdraft facilities has fallen to a new low – only 39% were confident that they would succeed compared with 52% in the first quarter of the year.

More and more companies are using personal savings as a way to fund their growth and cover short falls in cash flow. However, there are other avenues to explore – there are many different alternative finance options available. Invoice finance is one such option that can be used by many different business sectors which deal on an invoice basis – instead of relying on personal savings, you can unlock the funds tied up in invoices within 24 hours.

Rather than wait for customers to pay, you can release invoices to a factoring lender who can get 90% of the value to you quickly and efficiently, with the remainder released once the balance is cleared. This gives many small businesses a great alternative to the banks – just because you can’t secure a loan or an overdraft doesn’t mean that grow plans need to be put on hold.

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