It’s long been known that access to finance for small businesses has been limited by the bank’s priorities to reduce their own debt. Bank lending requirements are becoming all the more stringent, and despite government schemes, many businesses just don’t have adequate access to funding. This has been backed up by the invoice finance company Venture Finance, who have surveyed a number of UK accountants to show the scarcity of UK finance options for SMEs.
Figures showed that almost 60% of accountants believed that traditional bank finance is barely available for many small businesses. Of those accountants who worked with SMEs, 20% had seen bank funding withdrawn or lending conditions changed during the recession. Worryingly, 57% said their clients were still being undermined by cash shortages.
Only 17% of accountants interviewed believed that business loans are available and only 31% believed that the Enterprise Finance Guarantee was accessible for their clients, mainly due to the eligibility criteria of such schemes.
With a shortage of bank lending options and the travails of government scheme eligibility, where is there to turn? Indeed, almost a third believed that as well as business loans being more inaccessible, angel investors were now becoming less of a viable prospect.
In this new funding landscape, it’s clear that businesses need to re-evaluate their financing plans, especially now it’s clear that relying on the banks is not an option. Of the accountants interviewed, 53% recommended invoice finance as a sustainable way to fund growth and improve cash flow. In addition, 85% said it was widely available to eligible businesses. This shows its potential to provide for a range of SMEs in ways that the banks are unwilling to.
The funding environment for SMEs is harsh in today’s climate, and it’s not looking like it will improve any time soon. As such, if your business is struggling to find cash flow solutions, it’s worth looking away from the banks and towards alternative options – such as invoice finance.