SMEs
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How SMEs can survive and thrive in 2018

There’s a bulk of changes taking place in the UK, and indeed the wider world, which are set to impact the business community in one way or another.

Let’s look at some of the trends that might affect your company in the year ahead.

Your online presence will be even more important

According to the Capital Economics’ SME Growth Tracker, 90 per cent of British businesses plan to sell their products online by the end of 2018.

As it stands, just 64 per cent sell online, but it’s largely the smaller companies that plan to make headway by selling goods on their own websites.

Huge strides will be made in tech

The government’s industrial strategy, which puts tech at the top of the priority list, is set to give British industries a boost, particularly companies in the construction, artificial intelligence (AI), automotive, and life science sectors. It’s also thought that AI products could become accessible to small firms as costs come down.

But in a burgeoning tech world comes the increased threat of cyber attacks. Make sure you have the systems in place to protect your business from this danger.

You face a surge in regulatory changes

2018 is the year when regulators introduce a whole host of new rules, including Mifid II, PSD2 (which includes Open Banking in its midst), and GDPR, to name but a few.

For many businesses, this has been, and will continue to be, a huge operation to ensure they meet the necessary standards.

Plan a time each week or month to review your progress so you can comfortably meet deadlines.

The gig economy will grow

As more people go freelance in preference for flexible hours, we will gradually see the end of the traditional 9 to 5 working day.

In fact, a report from Timewise and EY, indicates that a whopping 87 per cent of British workers are either keen to work flexibly, or are already doing so.

Companies should take stock of this – and perhaps look at measuring employees’ on what they deliver, rather than the hours they sit at their desk.

Giving employees more freedom could actually benefit your business in the long run.

Keep a beady eye on Brexit

You’ve probably had enough of the dreaded “B” word, but it’s crucial to keep one eye on the outcomes of negotiations to gauge the potential impact on your business, particularly if you import or export goods.

In fact, research from the CBI in November found that optimism among SME manufacturers had deteriorated for the first time in a year as growth slowed and pricing pressure increased. Yet it’s not all doom and gloom, because the research found that companies were spending more on staff and innovation.

This year it will be more crucial than ever for British businesses to stay on their toes if they want survive, and ultimately thrive.

Peter Alderson, managing director of business finance group ​LDF, says:

“For many business owners across the UK, January is a time to consider the year ahead. Some will be adapting to accommodate pending changes in regulation, while others will be facilitating new business development, or recruitment aims. It’s very much a time for taking stock.

“There’s no doubt that a number of changes are coming for small business in 2018 which will, in turn, create some challenges over the next couple of years.

“Access to finance remains a critical consideration for UK small business, and more are exploring financial options outside of traditional bank offerings that can support the level of business development needed to compete in new tech and online spaces.

“It’s crucial that businesses, are financially agile enough to adapt.

“We’ve seen a large uplift in demand for our services in the last 12-months, which saw us deliver over £500m in funding to small business in 2017, up more than 30 per cent on the previous year, and this shows no sign of slowing.”

Source: City A.M.

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SMEs optimistic about obtaining finance in 2018, report shows

A report from retail bank Aldermore has shown small and medium-sized businesses are optimistic about obtaining finance over the next year.

The Aldermore Future Attitudes report surveyed more than 1,000 business decision-makers across the UK. They found 75 per cent are confident they will be able to access funding to achieve their growth ambitions, up from 63 per cent in Q4 2016.

Positive

The report also showed businesses are positive about their revenues, with more than 40 per cent expecting their revenues to increase over the next 12 months, compared to 39 per cent in Q4 2016. Eleven per cent of respondents said they are expecting their profits to increase significantly over the next 12 months.

Business owners also revealed how they plan to achieve revenue growth, with 50 per cent planning to boost their marketing efforts. 38 per cent are planning to launch new products, and 33 per cent say they will boost profits by entering new markets.

Crucial

Commenting on the report, Aldermore Group Managing Director of Business Finance Carl D’Ammassa said it’s encouraging that optimism among SME leaders is increasing, with attitudes towards business revenues positive for the next 12 months.

He added SMEs make an essential contribution to the economy and with Brexit progressing, their ability to get finance and help support the economy is crucial.

Source: LSBF

FinTech platform FSB
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FSB launches new FinTech platform to fund small business growth

A new FinTech platform regulated by the FSA launches today (10 January) aiming to help further the success of the UK’s small business and self-employed communities amid the findings of latest research that the cost of doing business in the capital is stifling small firms.

Access to finance is crucial to the small business sector which accounts for an annual turnover of £1.9 trillion a year – 51 per cent of all private sector turnover in the UK.

The FSB Funding Platform, developed by Finpoint, uses intelligent matching technology to match applicants with over 100 finance providers.

A pilot of the platform for FSB members in three UK regions shows that the average amount of finance a small business applies for from an alternative finance provider is £39,000 – half the amount sought from banks’. With 40 per cent of small businesses seeking alternative finance for equipment purchases and 40 per cent for working capital to fund short-term operations or cover late payments.

FSB’s London Chair, Michael Lassman said:

“We’re so pleased to be able to offer this exciting platform to our member base. Although it’s harnessing the latest innovations in tech it offers a very simple way to access finance, as well as access to human financial advisers. It will transform the business funding market and is a real step change for small businesses.”

Finpoint Managing Director Guy Bridge explained:

“We saw not enough transparency in the market, and we remain motivated by how we can use technology to provide an efficient service, but perhaps most importantly, we were keen on providing high quality customer service, which means any one of us may be on the phone when you call us up with a question about your funding needs. We quite like the label “FinTech”, because it is a mixture of Technology and Financial Services, with a heavy emphasis on “service.

“We’re thrilled to have been awarded the contract to provide FSB’s funding platform. As a small business ourselves – and a member of FSB – we get what’s needed, how small business would like to use the platform and we’re truly excited.”

Source: London Loves Business

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SME bosses optimistic about funding options in 2018

Nearly half of UK SME bosses think their business’ revenues will increase in 2018, thanks to better funding options.

The latest Aldermore Future Attitudes report reveals that three quarters (75 per cent) of SMEs, representing 4.13million* small and medium sized businesses across the UK, are confident that they will be able to access the funding options they need to grow their business over the next twelve months, compared to only 63 per cent in Q4 2016.

The report, which surveyed more than a thousand-business decision-makers across the UK, found that business owners are also more confident that their revenues will rise over the coming year. The methods of securing this growth vary with half (50 per cent) planning to increase marketing efforts, just under two fifths (39 per cent) launching new products or services, and a third (33 per cent) entering new markets.

In total, more than two in five (42 per cent) SME owners think they will see an increase in their revenues, compared to 39 per cent in Q4 2016, with over one in ten (11 per cent) of bosses expecting to see a significant increase in profits over the next twelve months.

Carl D’Ammassa, group managing director, business finance at Aldermore, says, ‘It is encouraging to see that optimism amongst SME leaders is increasing, with attitudes towards business revenues staying positive for the next 12 months. SMEs make an essential contribution to the UK economy and with Brexit discussions progressing, their ability to obtain finance and help support the growth of the UK economy will be crucial.

‘Planning can be a difficult task, but to ensure ongoing success, every business owner needs to have a vision for growth and an understanding of how they would like to get there.’

Source: Small Business

Small businesses uk 2018
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Small businesses enter 2018 full of hope

Three quarters of medium and small businesses are confident they will be able to access the funding they need to grow their business over the next 12 months, according to the Aldermore Future Attitudes report.

This result for the fourth quarter of 2017 was an increase from the same period in the previous year when only 63 per cent felt this way.

The report, which surveyed over a thousand-business decision-makers across the UK, found that business owners are also more confident that their revenues will rise over the coming year.

The methods of securing this growth vary with half planning to increase marketing efforts, just under two fifths – 39 per cent – launching new products or services, and a third entering new markets.

Carl D’Ammassa, group managing director for business finance at Aldermore, said: “It is encouraging to see that optimism amongst SME leaders is increasing, with attitudes towards business revenues staying positive for the next 12 months.

“SMEs make an essential contribution to the UK economy and with Brexit discussions progressing, their ability to obtain finance and help support the growth of the UK economy will be crucial.

“Planning can be a difficult task, but to ensure ongoing success, every business owner needs to have a vision for growth and an understanding of how they would like to get there.”

In total, more than two in five SME owners think they will see an increase in their revenues, compared to 39 per cent in Q4 2016, with over one in ten – 11 per cent – of bosses expecting to see a significant increase in profits over the next 12 months.

Source: FT Adviser

uk SMEs consider securing finance a struggle
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Aldermore reports growing financial confidence among UK SMEs

Small and medium-sized businesses in the UK are increasingly confident they can source the funds needed to drive growth in 2018, new research shows.

The latest Aldermore Future Attitudes report reveals that three-quarters (75%) of SMEs, representing more than four million companies, are confident that they will be able to access the funding they need to grow their businesses over the next year, compared to 63% in Q4 2016.

A total of 42% think their business’ revenues will increase over the coming 12 months, compared to 39% for the same period last year, despite the ongoing uncertainty of Brexit negotiations.

Half of business owners who are expecting an increase in business revenues over the coming year plan to make this happen by increasing marketing efforts.

Carl D’Ammassa, group managing director, business finance, at Aldermore, said: “It is encouraging to see that optimism amongst SME leaders is increasing, with attitudes towards business revenues staying positive for the next 12 months.

“SMEs make an essential contribution to the UK economy and with Brexit discussions progressing, their ability to obtain finance and help support the growth of the UK economy will be crucial.

“Planning can be a difficult task, but to ensure ongoing success, every business owner needs to have a vision for growth and an understanding of how they would like to get there.”

Source: Asset Finance International

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Money in and money out: the only cashflow figures that matter

As small businesses across the UK work over-time to settle their annual accounts, for all the various spreadsheets and ledgers, there are really only two key line items – money in, and money out.  This ebb and flow gets more complicated as the business grows, though healthy cash flow can be an issue for almost any size business, and in any industry. When you lack funds at a crucial juncture, it can be disastrous: if you’re a successful business, a temporary financial gap can halt your growth; if you’re struggling, it can snuff out any hope of recovery.

One of the biggest barriers to smooth and healthy cash flow is late payments. Some recent research we conducted revealed that on average, invoices are not paid until 74 days after being issued, despite typical 30-day payment terms.

Of the 96 sectors analysed, it was only employment agencies that paid their invoice within 30 days on average. Just 12 sectors, including education and construction, managed to pay invoices in under 45 days. From the 129,000 invoices analysed, the worst performing sectors were membership bodies including trade bodies and other subscription based organisations. If you sell goods or services into this sector, you may well be in for a wait of more than 137 days – over four months – for payment.

The key mantra that I would advise businesses to repeat to themselves when thinking about cash flow, is “it’s not a sale until you have received payment.” I would also emphasise the importance of real honesty when putting financial forecasts together – even if the numbers on the screen aren’t quite what you were hoping to see. If you can see that sales are dipping for example, due to seasonality, that is the time to think about whether you might need to seek external finance. Acknowledge, and then act quickly. It’s much easier to get money when you don’t need it.

Small business owners in particular face a huge number of competing priorities on very limited time, though a proactive approach to financial planning must remain at the top of the list if they are to thrive as a business. It’s a case of taking control, and managing the business with as much care as you would your personal finances.

To help prevent a cash flow problem, small businesses should take care that they are set up to invoice clients accurately, ensuring that they are billing the correct entity with the correct details. After a sale takes place, don’t be afraid to be proactive in following up with the client. Indeed, the longer a debt goes unpaid, the more likely it is it will remain unpaid. Of course, maintaining a strong relationship with the client is a good way to increase the likelihood that they will pay you on time. Take notice of those that do, and thank them – it won’t go unnoticed.

If you do find that payments are late your first question should be ‘why?’ Be sure to look at any internal problems. Perhaps you have a faulty product or service – speak to your client to figure out the issue so you can do everything within your power to resolve it quickly. Similarly, check to see that these late payments are not causing further issues for your business. Be aware of how many sources you are borrowing money from. Repaying loans with interest to numerous people can leave a business running even harder to catch up, yet still falling behind. If you plan far ahead enough in advance, you may not need to rely on short term loans to deal with late payment cash flow issues.

We all need to take responsibility for timely business to business payments to create a prosperous and fair ecosystem. Within this conversation, it’s important that we address both long payment terms and late payments – equally concerning, but separate issues. Without a commitment to address these topics head on, we risk stunting and stifling the UK’s businesses.

Source: SME Web

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Loan rejection is a big issue for small businesses – the UK government’s Bank Referral Scheme needs an overhaul

Just over a year on from its launch, the UK’s much-vaunted Bank Referral Scheme hasn’t quite delivered in the way that many were expecting.

As the year races to a close, it’s worth reflecting on the scheme’s limitations as well as the things it has got right since its inception in November 2016.

On balance, the scheme has made some progress against a backdrop of serious economic turbulence and political uncertainty.

2017 has proved to be a trying year for many businesses, particularly SMEs. According to the FSB, the cost of doing business for small firms is now at its highest level since 2014.

Business owners also face the added administrative burden of the government’s workplace pension deadline and the prospect of reporting their tax commitments quarterly, under the government’s Making Tax Digital initiative.

On top of that, the Bank of England’s most recent loan statistics make dismal reading for the nation’s SMEs. Lending to small businesses fell by £0.4 billion in October, increasing the need for the government to provide a robust response to support the fabled ‘backbone of the economy’.

To date, the Bank Referral Scheme has made some progress towards finding a solution to this lending deficit, but could go much further.

Launched 13 months ago, the scheme aims to help businesses that have had loan applications rejected by a number of banks – by instead funneling their cases to three alternative finance platforms.

In August a temperature test of the scheme’s efficacy was taken. It found that just 2.8% of the 8,100 businesses referred through the scheme were ultimately able to draw down finance – that’s £3.8 million lent to small businesses over the course of nine months.

This is proof that the scheme is indeed working, but at a markedly slower rate than expected.

This is fundamentally due to issues in the scheme’s delivery. When the BRS was first being discussed by the Treasury, several options about how rejected funding requests would be dealt with were on the table, before the government settled on the three – now four – finance platforms that the scheme uses today.

By referring small businesses to these platforms, the government essentially overlooked some of the main issues that SMEs face when seeking funding.

First and foremost, no small business’s needs are the same, which is why there is no off-the-shelf financial product in the commercial sector – something which the scheme fails to take into consideration.

Secondly, awareness of the funding options available to small businesses has hamstrung market competition. The CMA found in May 2016 that 90% of SMEs get their business loans from the bank where they have their current account.

The Bank Referral Scheme was initially set up to redress this lack of awareness among small businesses of the finance options outside their main bank, but instead of widening the playing field, the scheme has seemingly only served to channel rejected loans into another bottleneck.

In 2015, before the BRS was introduced, 324,000 small and medium-sized businesses sought a loan or overdraft; of which a quarter (26%) were initially declined by their bank, but only 3% of those who were turned down were referred to other sources for help.

In the face of such poor awareness among businesses of the other options available to them, the scheme was always going to have its work cut out. In the past, small businesses have been rejected for funding and then simply not known where to turn next – the scheme does little to fundamentally redress this feeling of being caught in the system.

Representatives of the scheme have tried to explain away its low lending rates by saying that a large number of small businesses don’t have fully formed business plans, so lending to them represents too much of a risk. That may well be true, but a large part of what sector specialist brokers do is work with brands to flesh out their proposition.

The scheme, with its ‘sausage machine’ approach, doesn’t seem to have the capacity to do this effectively in its current form. All too often this means start-up founders bristling with ideas may well fall at the first hurdle – with no apparent structure to hold them up, these brilliant ideas could well simply fade away.

If the government really does intend to champion small businesses, it needs to create a supportive system that incubates start-ups, nurturing ideas and helping provide the finance they need to grow.

This is proof positive that fresh tack is needed. The cleanest approach would be for the Treasury to expand the scope of the scheme, opening rejected loan applications to brokers.

It’s patently clear that small businesses need an element of guidance when it comes to seeking out lending and that an automated approach isn’t fit for purpose.

Independent commercial finance brokers and their lenders are well set-up to do this and often are able to advise SMEs and start-ups about the type of finance they might need, as well as helping them turn their business ideas into full-blown actionable plans.

Only when this guidance is translated to the market will the scheme truly start to work in a way that benefits the entire small business community.

Source: Asset Finance International

SMALL BUSINESSES FINANCING SME lending
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Get Started: Small businesses more interested in loans

Small businesses are getting more interested in borrowing, but many are still finding it hard to get loans from banks.

That’s the finding of a quarterly survey of small businesses released last week by Pepperdine University’s Graziadio School of Business and Management and Dun & Bradstreet Corp.

An index that measures small companies’ demand for financing, including loans and investment money, rose 3.6 percent to 37.5 from 36.2 in the third quarter. A separate index, which measures their ability to get financing, rose 0.2 percent to 33.1 from 33.

But while demand is up, many owners aren’t in the market for credit. Thirty-eight percent of small companies didn’t get any credit in the last quarter. And small businesses are still finding it harder to get loans than mid-sized ones do — 61 percent of small company owners called debt financing difficult to get versus 31 percent of mid-sized business owners. During the previous three months, 36 percent of small businesses were able to get bank loans, compared to 69 percent of mid-sized companies.

The survey findings show that owners who have shied away from risks like borrowing ever since the election may be feeling more secure about taking on debt. But banks that are adverse to risk, especially given the rules imposed on them by the Dodd-Frank banking law, are still wary about small companies.

On a positive note, many companies wanted financing because they want to grow or acquire another business — 44 percent of small businesses, and 47 percent of mid-sized ones. And 46 percent of small companies and 70 percent of mid-size ones who weren’t trying to raise financing because said they didn’t need the money because their cash flow is good.

The survey, conducted from Oct. 31 to mid-November, questioned 1,341 companies from the Dun & Bradstreet database that have revenue up to $100 million. Dun & Bradstreet compiles credit reports on businesses of all sizes.

ONLINE LEARNING

Business owners with down time the last week of the year might want to do some online learning. There are many free online seminars, workshops and courses they can take on their own, at any time.

SCORE, which sponsors live online seminars, has them archived on its website, www.score.org . The seminars have dealt with topics including marketing, managing, social media and business plans. The organization, which offers free advice to small businesses, also has interactive courses available on its website.

The Small Business Administration also has a variety of online courses, including business basics, and also courses about cybersecurity, customer service, disaster recovery and starting a business. You can find them at www.sba.gov.

Source: Yahoo News UK

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A helping hand for small businesses

A decade after the credit crunch, too many small and medium-sized enterprises (SMEs) in the UK still feel their potential is being hampered by a lack of access to appropriate financing. The government’s Industrial Strategy report, published at the end of November, identified financing issues as a clear problem for SMEs that are looking to grow; surveys of sentiment continue to reveal frustration.

Research from Hitachi Capital Business Finance shows that two-thirds of SMEs with growth plans for the year ahead fear that their expansion plans could be derailed if they cannot secure appropriate finance. A third of SMEs applying for finance aren’t securing enough funding to underpin their investment plans, according to similar research from Close Brothers Group; a quarter of SMEs think funding is still too dear.

The answer may be alternative finance (alt-fi). Traditional lenders remain cautious about expanding their balance sheets, whereas alt-fi volumes are continuing to grow rapidly. A report from the Cambridge Centre for Alternative Finance (CCAF), based at Cambridge University’s Judge Business School, shows the market grew by 43% in 2016, with £4.6bn of funding generated, up from £3.2bn in the previous year. Around three-quarters of this cash went to start-ups and SMEs.

The CCAF suggests that the options for SMEs seeking alt-fi may be much broader than often imagined. Peer-to-peer (P2P) business lending, popularised by platforms such as Funding Circle and RateSetter, generated £1.23bn last year and was the single largest market segment, but other types of alt-fi made a significant impact too. P2P property lending raised almost £1.2bn, an 88% leap on 2015, while invoice trading delivered £452m of SME funding, and equity-based crowdfunding generated a further £272m.

It’s important that SMEs get more help to explore all their options. Under a scheme launched earlier this year, Britain’s banks, which reject as many as one in four applications for SME finance, are required to refer businesses that they turn down for funding to an online platform where alternative providers can offer their services. Several hundred SMEs have already benefited from the initiative, though there have also been concerns that leading banks aren’t fulfilling these requirements. On the right, we look at what to do if you’re turned down for finance.

What to do if your business is turned down for a loan

The big banks are rejecting around 100,000 small businesses each year, denying them access to £4bn of funding, according to figures from the British Business Bank. But if your business is turned down for finance, don’t despair – there may be steps you can take to get your application over the line. If you believe the rejection is unfair, you are entitled to appeal. UK banks now have to follow an appeals process laid down by regulators – independent monitoring of these cases suggests that significant numbers of SMEs are successful. If you’re certain that it is bank finance that your business requires, consider talking to other banks about a loan.

The alternative is to look at other types of funding. If a bank turns down your business for finance, it is now legally required to refer you to alternative providers via the bank referral scheme. With your permission, three online platforms are approved to receive these referrals. These platforms – Funding Options, Business Finance Compared and Funding Xchange – share your information with the alternative-finance providers registered with them in order to match you to a lender that can help.

Source: Money Week