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UK SMEs to bolster employee numbers following promising start to 2022

Two in five (40.0 per cent) small and medium-sized businesses in the UK plan to hire, on average, six new employees before the end of March, following a promising start to the year, according to the latest quarterly Barclaycard Payments SME Barometer.

The news comes as 56.2 per cent of SMEs report a rise in earnings in the last quarter of 2021 against the same period in 2020. Data from Barclaycard Payments, which processes £1 in every £3 spent in the UK and services over 350,000 SMEs, supports this trend – with transaction volumes up 42.3 per cent for in the last three months of 2021, compared to the same period in 2020.

2022 has started positively for many SMEs despite concerns around economic uncertainties, with almost three fifths (58.1 per cent) predicting an increase in revenue this quarter compared to the same period last year when the UK was in the third COVID-19 lockdown.

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On average, businesses forecast a year-on-year increase in Q1 turnover by 13.5 per cent. Perhaps unsurprisingly, hospitality and leisure operators – whose physical premises were closed this time last year – expect the largest turnover increase (33.6 per cent), followed by retail (16.5 per cent), transport and distribution (14.6 per cent) and financial services firms (11.2 per cent). This is likely due to the impact of coronavirus settling and SMEs feeling more confident to invest or seek investment – evidenced by 32.7 per cent of UK SMEs who plan a ‘high level’ of investment in their business over the next 12 months.

Year-on-year payments volumes also demonstrate a feeling of confidence amongst SMEs across the UK, with leisure and entertainment, food and drink and retail SMEs seeing an increase by 471.0 per cent, 110.8 per cent and 54.1 per cent respectively.

Overall, there is a quiet confidence among small and medium-sized company leaders, that they are on track to have a positive finish the financial year, despite a broader atmosphere of uncertainty among rising inflation, the cost of living on consumers and the lingering impact of the Omicron variant.

The research, which polled 577 senior staff working in UK SMEs, found that overall business optimism is beginning to build, scoring 55 out of a possible 100, up from a low of just 40 points in Q2 2020. This quarter equals the highest levels recorded (with Q1 2020, Q2 2021 and Q3 2021 recording 55 each), since the Barclaycard Payments SME Barometer started in February 2020, before the first lockdown.

Yet, while almost half (48.7 per cent) are optimistic about the outlook for their firms, confidence in the broader economy is less pronounced, with those reporting a neutral sentiment (39.6 per cent) outweighing those who are optimistic (23.8 per cent).

Just under two thirds of SMEs (64.6 per cent) are worried about a rise in the cost of living and inflation and a similar proportion (66.6 per cent) highlight a feeling of nervousness about increases in their energy bills, with four in ten (39.4 per cent) stating that it will impact their ability to remain competitive, while 9.5 per cent will reconsider the need for a physical retail outlet as a result.

When asked to select the number one challenge for this year, SME leaders now view the rising cost of living as a bigger headwind than the ongoing uncertainty around the pandemic. Over a tenth (10.6 per cent) of the respondents to the Barclaycard Payments study selected a rise in inflation as the issue causing them the greatest concern, this was followed by the stability of the domestic economy (10.2 per cent) and the difficulties associated with COVID-19 (6.6 per cent). In contrast, SME leaders ranked the pandemic (22.0 per cent) as the biggest challenge of 2021, followed by the domestic economy (8.2 per cent) and the cost of materials (7.8 per cent).

As a result of the challenging economic backdrop, SMEs have a mixed view on how this will impact consumer spending throughout the year. While four in 10 (41.7 per cent) SMEs expect it to fall, a further 29.2 per cent believe that, although shoppers will spend cautiously, they are likely to spend more on loved ones to help lift their spirits.

Colin O’Flaherty, Head of Small Business at Barclaycard Payments, said: “Small and medium-sized businesses have had a positive start to the year and it’s encouraging to see so many seeking to add to their workforce. SMEs are also remaining resilient by continuing to focus on areas within their control, such as by improving their operating models to overcome the hangover to supply chain disruption which peaked at the end of last year.

“The coming months will no doubt present continued challenges for British SMEs and the impact of rising costs will remain front of mind. Businesses will need to call on the same spirit for innovation and specialised support that has propelled them through the last two years.”

Jo Fairley, Co-Founder of Green & Blacks and SME Investor said: “The strong start to the year for British small and medium-sized businesses, who are looking forward to an average anticipated uplift of 13.5% in earnings over Q1, is really great news. But it comes at a time where two thirds of SMEs are also acutely aware of the challenges posed by the rising cost of living, inflation and energy bills – potentially a perfect storm.

“From my own experience running multiple ventures, I know all too well that trying to weather economic turbulence while growing a business can be daunting on top of the day-to-day fire-fighting. Nevertheless, the last couple of years have shown that the British consumer is keener than ever before to support smaller and local businesses, and this should prove really positive for SMEs, helping them not just to cope but go grow in the months ahead.”

Earlier this month, Barclays launched a package of support aimed at boosting small businesses, with the bank set to host 50 masterclasses a month this year, which will focus on managing cash flow, business growth and support for wellbeing. The classes are open to all small business owners, with national events focused on the hospitality and care home sectors.

Source: The Manufacturer

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SMEs start looking for larger loans

Small- and medium-sized enterprises (SMEs) are beginning to look for larger loans of £100,000 or more, as they seek to scale after the disruption of Covid-19.

According to the latest SME Expert Index by business lender Iwoca, in the third quarter of last year loans under £25,000 were the most popular among SMEs. However by the fourth quarter, the majority of SMEs were seeking loans of £100,000 or more.

Iwoca noted that the shifts in priorities reflect a change in confidence in the economy over the past year.
In the first quarter of last year, just 25 per cent of brokers said that their SME clients were borrowing money to fund their growth, but this figure rose to 43 per cent by the fourth quarter of 2021.

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Fears surrounding Covid appear to be dissipating, with just nine per cent of brokers saying that recovery from lockdown or closure was the reason that SMEs were requesting finance.

Over a quarter (26 per cent) of brokers told Iwoca that loans valued between £100,001 and £200,000 were the most commonly requested among their SME clients in the fourth quarter of last year.

Meanwhile, demand for smaller loans have fallen by 15 per cent, quarter-on-quarter.

“This quarter’s SME Expert Index indicates growing confidence among small businesses, who have endured the blow of the Omicron shock,” said Colin Goldstein, commercial growth director of Iwoca.

“After two years of uncertainty, SMEs are now able to set their sights on growth – an encouraging sign that the mainstay of the UK economy is on its feet once again.

“We need to continue to support small businesses in accessing finance, to power this growth and contribute to a meaningful economic recovery.”

By KATHRYN GAW

Source: P2P Finance News

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Glasgow ranked top UK location for small businesses

Glasgow has emerged as the best city to work in for a small business in Britain, according to new research compiled by small business lender iwoca.

It ranked areas using Office for National Statistics data on average wage, commute, job density, house price and growth of the number of small businesses.

Glasgow topped the list, scoring highly on the shortness of the average commute and the growth of small businesses in the city since 2016.

Glaswegians spend on average 29 minutes commuting between work and home, compared to 50 minutes in Richmond upon Thames.

Between 2016 and 2021, the number of small businesses in the city also increased by 49%. With its burgeoning finance, technology and industrial sectors and plans to build a new Glasgow Metro, iwoca said the city is a natural centre for small business jobs in Scotland.

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Dundee came 7th in the top 25, scoring highly on the growth of small businesses in the city since 2016 – boasting 50% growth – but poorly on average hourly wage and job density, where it ranked outside the top 100 and 25 respectively.

Although a major centre for tourism, Edinburgh lagged behind Glasgow and Dundee on the growth in the number of small businesses, which increased by 32% between 2016 and 2021, ranking outside the top 50 in Britain for this measure.

With its high house prices and long commute times, London did not appear within the Top 25.

RankLocal AuthorityCommuting time (minutes)Average hourly wageJob densitySME Growth 2016 to 2021Average house price
1Glasgow29£19.191.0448.60%£185,595
2Manchester29£19.241.1852.86%£203,250
3Derby23£20.120.9837.28%£175,000
4Liverpool29£17.900.8947.65%£145,877
5Newcastle upon Tyne30£18.431.0245.72%£175,000
6Dundee22£17.670.8549.61%£165,600
7Crawley23£20.481.4248.12%£310,000
8Southampton26£19.910.7762.78%£226,000
9Warrington25£18.631.1842.29%£212,000
10Salford28£17.740.8962.47%£190,000

Francesca Cingano, owner of Glasgow-based Italian catering business Cateritaly, said: “Moving from Italy to Glasgow in 2014 to set up an Italian catering business was the best decision I have made.

“Strangers have gone out of their way to help us solve business problems, commuting around the city is super easy and the council have been incredibly helpful assisting us with health and safety measures, and hiring new apprentices.

“In this environment, we are excited to continue to grow, scale and hire over the coming years.”

Christoph Rieche, iwoca’s co-founder and chief executive, said: “The pandemic has fundamentally changed the life choices we make – it has changed the way we work, where we want to be based and has made many people across the country consider if their current career or company they work for is the right one for them.

“The big corporations grab the headlines and have the profile, but it’s the small businesses who are making this country tick.

“It’s really fantastic to see Glasgow featured as the top spot for SME jobs.”

By Peter A Walker

Source: Insider

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How small businesses are coping after two years of lockdowns

With Plan B measures easing this week, Britain’s small businesses are beginning to look forward, cautiously, to running in a more ‘normal’ fashion.

However, the landscape for these companies — which make up over 99% of UK businesses — has changed unimaginably in the two years since Covid first hit our shores.

The long months of closures, restrictions and constantly changing guidance have taken their toll on SMEs in every sector.

One study from business insurer SimplyBusiness suggests that, on average, small businesses have lost over £20,000 each due to the virus.

Now business owners are concerned about an impending rise in National Insurance, spiralling inflation and the tapering-off of the final coronavirus support schemes.

But despite storm clouds on the horizon, Mike Cherry, Federation of Small Businesses national chairman, says there is optimism in the sector, with more than half of small firms planning growth this year.

‘After two years of turmoil, in which firms have once again shown their adaptability and resilience, the small business community stands ready to spur our economic recovery.

The majority intend to grow over the coming 12 months, and many are looking to increase headcounts,’ he says.

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How small businesses have been affected

The latest government statistics make for sobering reading. The number of private businesses in the UK had been steadily rising until coronavirus came along, then shrank 6.5% in the calendar year 2020 to 2021.

‘One-man band’ businesses are the most likely to have closed, while large businesses only declined by 1%. While there are no more up-to-date statistics on this measure, there is evidence that the situation has worsened since.

The number of businesses removed from the government register was up 24% on the average in the first three quarters of 2021, suggesting a further wave of closures.

The cost has also been huge for those small businesses that have survived. Bank of England figures show that SMEs are now 25% more indebted than they were before the pandemic, because they have borrowed in order to survive. The Bank warned that these debt-laden businesses are vulnerable and that there will be more insolvencies ahead.

The wellbeing of entrepreneurs and small business owners has been badly affected. Alan Thomas, UK CEO at insurer Simply Business, says that over 60% of small business owners have been impacted by financial worries due to the pandemic, with one in five saying that the pandemic has left them in a ‘bad place’ in terms of their mental health.

‘Small business owners have encountered countless challenges during the course of the pandemic,’ Thomas says. ‘Livelihoods are on the line, and understandably this has had a huge impact on people’s wellbeing, with a staggering 82% last year reporting poor mental health.

‘Entering 2022, it’s clear that many of these challenges remain, from staff shortages to supply chain issues. This worrying situation should concern us all, because small businesses are crucial to our economy and communities, and will be central to our collective recovery.’

Not all small businesses have been affected equally by the pandemic. Figures show that certain sectors and certain areas of the UK have found it particularly difficult.

Looking to the future

There is evidence that the small business sector may thrive again. More encouraging government statistics suggest more than 1,800 companies are being set up every day, with London and the South-East the most popular places to start a business, and the North-West the next most popular region.

The latest Federation of Small Businesses (FSB) survey shows that nearly one in six SMEs increased its number of employees in the quarter to December last year, with 17% hoping to do the same this quarter.

Some sectors, of course, are firing on all cylinders. The technology sector counted 2021 its best year ever, with start-up and scale-up businesses raising a record £29.4billion.

According to the FSB, small businesses in the construction industry and the information and communication sector are feeling confident about the future.

At the other end of the scale, though, retailers, accommodation providers and small businesses in the manufacturing industry are far less confident about what 2022 will bring, pushing the overall score for SME confidence down to a one-year low.

Kay Daniel Neufeld, head of forecasting and thought leadership at the Centre for Economics and Business Research, says Omicron had a ‘chilling effect’ on business confidence in the retail and leisure sectors, while manufacturers remain concerned about supply chain issues and inflation, which has pushed up costs.

‘The share of small businesses reporting that operating costs have increased rose to a decade high of 72.9% in Q4 2021, with greater expenses for inputs, fuel, utility and labour being the main causes,’ says Neufeld.

So, while some businesses are rejoicing in a return to normality or even growing from shoots put down during lockdown, many are still battered by the experience of the last two years, and fighting on all fronts to survive.

The onus may be on the government to ensure the SME sector continues to grow, with Cherry, at the FSB, asking in particular for more funding so that companies can deal with the issues ahead.

‘Come April, they’ll be faced with a jobs tax hike, an increase in dividend taxation and fresh business rates bills,’ he says of his members.

‘We need the government to start looking closely at the policies that will empower the small business community to spur our recovery from this recession, as it did the last. The growth intentions are there, but we need the right support to turn vision into reality.’

By Rosie Murray-West

Source: Metro

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How To Find The Best Business Loan

Whether you’re planning to expand your business with new premises or equipment or to invest in recruitment or marketing, you may be considering taking out a business loan.

To help you decide whether a business loan is the right finance option for you, here we take a look at what they are, what you’ll need to apply for one, and the alternatives, as well as answering some common questions about business loans.

What is a business loan?

A business loan is a form of borrowing for commercial businesses rather than individuals. Some may be more suitable for start-up businesses while others may only be suitable for businesses with a certain number of years of filed accounts.

You’ll usually repay the amount you borrow in monthly instalments over an agreed period of time, with interest on top. Typically, business loans are for amounts from around £1,000 up to potentially millions.

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Are business loans secured?

Business loans can be secured or unsecured. A secured loan is one that is linked to an asset, such as property, vehicles or stock. This means that if you can’t make payments, the lender may take your asset to pay for the loan. 

As there is less risk to the lender, secured loans are usually for higher amounts and interest rates are usually lower.

Unsecured loans don’t require an asset as security so tend to be for smaller sums and come with higher interest rates. Unsecured loans may be more suitable for small businesses without large assets. 

Some lenders will ask for a personal guarantee from a company director for an unsecured loan.

What types of business loan are there?

Some of the most common types of business loans include:

Bank loan

With a bank business loan, you’ll borrow a set amount of cash from a bank or building society over an agreed period of time, with interest.

Government-backed Start Up Loan

This is an unsecured personal loan backed by the government to start or grow your business. To apply for this type of loan, you must live in the UK, be over the age of 18 and have (or plan to start) a UK-based business that’s been fully trading for less than 24 months.

Start Up Loans have a fixed interest rate of 6%, are for amounts of from £500 to £25,000, and you can repay the loan over a period of one to five years.

Short-term business loan

Short-term business loans are aimed at commercial organisations which want to borrow for a few months, rather than years, and don’t want to be tied into lengthy repayments. They can be over a period of weeks or months. However, they tend to charge higher interest rates than other loans so make sure you know what these are.

Peer-to-peer business loan

With a peer-to-peer loan (or a P2P), you’ll borrow money from private investors rather than a bank. You will usually be matched to these investors through an online platform. You may need to pay a fee to arrange the loan, so pay careful attention to any fees, charges and interest rates before committing.

Cash advance

A cash advance business loan (also known as merchant cash advance) allows you to borrow money against your business’ future credit or debit card sales. The amount you repay monthly will be based on a pre-agreed percentage of your card sales, so you’ll pay more when your business is doing well and less when it’s not.

Invoice finance

This is when a lender uses your unpaid invoices as security to lend to you. There are two main types of invoice financing:

  • invoice factoring – you’ll be able to borrow a percentage of the value of your invoices and the lender will collect payment direct from your customers. The lender will then take its costs and you’ll be paid the remaining balance.
  • invoice discounting – this allows you to borrow against the value of your invoices, but you’ll collect money from your customers and then pay your agreed fee.

How do you decide which type of business loan to apply for?

When considering taking out a business loan and deciding which type to apply for, you’ll need to think about:

  • how much money you want to borrow
  • which loans are suitable for your business type – some loans such as Start Up Loans are only suitable for new businesses, while cash advance business loans are only suitable for businesses that generate a certain amount of revenue via card payments
  • how much you can afford to pay back each month, taking the interest rate into account
  • the length of time you’d like to take the loan out for. While it may be tempting to take a loan out over a longer length of time, you may end up paying more overall in interest
  • comparing the fees and charges with each loan you are considering.

It’s important to compare your options and to shop around before committing to an option or lender, looking at the overall costs of borrowing.

What do I need to apply for a business loan?

Before you apply for a business loan, you’ll need to be clear about:

  • the amount you’d like to borrow
  • what you are borrowing the money for
  • how much you can afford to repay each month
  • how long you’ll need to repay the loan.

As with other types of loans, your business’ credit rating is likely to be checked, with more competitive loan terms generally being offered for those with a good credit score.

Some ways to improve your business’ credit score include:

  • checking your credit report and disputing any errors
  • paying bills on time
  • if you’re a limited company, filing full, rather than abbreviated, accounts to Companies House
  • making sure you have enough money in your account to cover any planned payments
  • only applying for credit when you need it. Making lots of applications suggests you are struggling financially. You could ask for a quote instead
  • keeping all of your information, such as your business address, up-to-date. Notify suppliers, as well as Companies House, of any changes
  • avoiding county court judgements (CCJ) as these are recorded on your credit report.

You may also be asked for copies of your business accounts, bank statements, details of profits and loss, tax returns, a business plan and proof of address and IDs of company directors.

Once you have gathered your documentation and have decided on the type of business loan most suitable for you, you can shop around then apply.

What should I consider when comparing business loans?

When comparing loans, some important elements to check are:

  • whether you are eligible for the loan you are considering. Always check the lender’s requirements carefully before applying
  • what the interest rates are for the loan and whether they are fixed or variable. It’s worth remembering that Representative APR means that the rate, or lower, is offered to at least 51% of applicants, so 49% of applicants will likely be offered a higher rate
  • whether your loan provider offers a repayment holiday (a few months off paying). However, taking a break from paying will mean that it will take you longer overall to pay off the loan and you’ll pay more in interest in the long run
  • whether there’s an early repayment charge on the loan.

What are the alternatives to taking out a business loan?

If you don’t think that a business loan is for you, there are other options including:

  • Business credit cards – if you are looking to borrow smaller sums, a business credit card may be suitable. You may benefit from an interest-free period on your purchases. However, always pay your balance off each month to avoid paying interest charges or fees and check what the card’s annual fee and interest rates are after any 0% period.
  • Crowdfunding – this allows you to raise investment, often by pitching your business idea online, in exchange for rewards for the investors you attract. You could sell a stake of your business through equity crowdfunding or offer a reward such as free products or tickets through reward crowdfunding.
  • Overdrafts – your business account may have an overdraft which is either interest free or a low APR. This is usually only suitable for small amounts, though, and you’ll need to check the terms of your overdraft and stick to them.

Frequently asked questions

What happens if I miss a payment on a business loan or can’t pay it back?

If you miss a payment, you’ll have to make up the missing amount as soon as possible. You’ll probably have to pay a late payment fee and extra interest and may have to pay an administration fee too, depending on the terms and conditions of your loan. If you’ve taken out a secured loan, your assets may be seized if you default on the loan completely.

Defaulting on your loan can affect your credit score and how likely you are to be able to take business finance out in the future. The timeframe for defaulting will be detailed in your loan contract so read this carefully. If you can’t pay back your loan, the lender may take legal action to reclaim it.

Do I need to have a business account to take out a business loan?

This will depend on the type of loan you choose and who you want to borrow the money from. If you borrow from your bank, it may be more straightforward as it will know your business history – but always shop around to make sure it’s a competitive way to borrow.

Can I take out a business loan if I have a poor credit rating?

You may be able to take out certain business loans with a poor credit rating, but you are likely to be offered higher interest rates and more checks may be done on your business. You may be more likely to be approved for a secured loan than an unsecured one.

How long will it take to get a business loan?

The length of time it takes your loan to go through will depend on a number of factors such as the type of loan you are applying for, the documentation you can provide, the amount you are borrowing and whether you are applying for a secured or unsecured loan. 

With a secured loan, as an example, you will need to allow time for your assets to be valued.

By Cathy Toogood

Source: Forbes

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Natwest launching green loans to help UK businesses go and grow greener

NatWest has today announced it is launching green loans, and through Lombard, green asset finance propositions for qualifying SMEs, with no arrangement fee, to help them achieve their sustainability ambitions.

Following the announcement of the bank’s ambition to provide £100bn of Climate and Sustainable Funding and Financing to customers by the end of 2025, green loans and green asset finance are due to be open for applications from 18 February 2022. Together, these propositions aim to help qualifying SMEs finance the business assets to support their sustainability ambitions, such as solar panels, electric vehicles, or heat pumps on commercial buildings that fall within the eligible list developed by the bank on an ongoing basis.

Customers do not need to be existing NatWest customers to apply, and the green loan proposition will be available across NatWest, Royal Bank of Scotland, and Ulster Bank NI brands, whilst the Green Asset Finance will be available through the Lombard brand.

The new propositions are designed to open up opportunities for sustainable growth options for qualifying SMEs and reflect the societal benefit of delivering climate action. To apply, qualifying SMEs will work directly with a NatWest or Lombard Relationship Manager to discuss their needs and check their eligibility.

The announcement follows the publication of NatWest’s A Springboard to Sustainable Recovery report[1] last October, which found that the UK’s six million SMEs can achieve 50% of the UK’s Net Zero decarbonisation goals worth an estimated £160bn revenue opportunity. However, the report found that less than 10% of SMEs currently see climate action as a source of future growth, and that SMEs lack access to support through funding, knowledge and training.

The new propositions will be open to applications from qualifying SMEs who want to acquire assets that fall within the eligible list developed by the bank from time to time, relating to:

  • Clean buildings: retrofits for buildings and low carbon heating measures
  • Clean energy: renewable energy generation and energy storage systems
  • Clean transport: electric vehicles
  • Agriculture: renewable technology, crops, livestock, forest respiration and conservation, marine and low emission management

Contact us today to discuss Business Loans and how we can assist you.

Green Asset Finance

Lombard, as part of NatWest Group, is a specialist provider of asset finance across multiple business sectors and has been financing sustainability assets for many years. Its new Green Asset Finance proposition*** has no arrangement fee, and aims to increase choices available to UK businesses by supporting their investment in sustainability with a wider range of financing options.

Asset finance provides businesses with an efficient way to finance a wide range of business assets, including assets that customers use to make their businesses more sustainable and electric vehicles. Asset finance provides businesses with a way to spread the costs of an asset over the period they will use it.

Lombard Vehicle Solutions, our Contract Hire solution provided through ALD Automotive, also enables customers to flexibly lease new electric and hybrid vehicles with the additional services they need to meet their needs.

Paul Thwaite, CEO of Commercial Banking, NatWest Group said: “Climate change is one of the biggest global challenges we face today, and SMEs have a critical role to play in helping the UK realise its green ambition. The reality is that while SMEs want to help by reducing emissions, they face many barriers doing so such as limited access to information, funding and training.

“We’re working to remove these barriers with concrete actions – providing incentives, such as loans and asset financing that aim to support sustainability ambitions, and aim to benefit businesses whether they bank with NatWest or not.

“Today we’re announcing our ambition to stand by small businesses of the UK to help them reduce emissions and explore the opportunities that a move towards a green economy brings for us all. We cannot underestimate the power of small changes to make a big impact.”

Climate Hub – aiming to help SMEs go and grow greener

Information on how to apply for a green loan or green asset financing is available on the NatWest Climate Hub. The new Climate Hub features tips, insights and tools aiming to help all UK SMEs act now to tackle climate change, by reducing emissions and unlocking green growth opportunities.

The Climate Hub brings together resources, products and services that address some of the gaps identified in NatWest’s A Springboard to Sustainability report, as well as educating SMEs around the financial benefits of transitioning towards Net Zero.

Visitors to the Climate Hub will also have free access to:

  • Information on the pilot of our carbon tracker app, developed in partnership with Cogo, which is due to launch in February 2022 with up to 500 SMEs in the manufacturing and transport sectors. The app is designed specifically for SMEs to give an estimate of, and help them understand, their carbon footprint and provide suggestions as to how SMEs may be able to reduce it.
  • Details of the new green loan for SME businesses announced today, and green asset financing solutions to support SME customers in their transition journeys.
  • Information on NatWest’s six specialist Accelerators connecting SMEs with regional

By Gemma Lloyd

Source: Pro Landscaper Magazine

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Small business loans will “give hope to thousands”

New government loans announced for small businesses will “give hope to thousands” as they fight to survive the impact of the coronavirus pandemic.

That is the view of the Federation of Small Businesses, who welcomed Chancellor Rishi Sunak’s announcement of the micro loan scheme which provides loans of up to £25,000 with a 100 per cent government guarantee.

Making the announcement yesterday, the Chancellor said the bounce back loans – which are capped at 25 per cent of turnover and have a streamlined application process – will be available from Monday.

And FSB national chairman Mike Cherry said the announcement was vital for those firms not covered by the existing coronavirus loan scheme.

He said: “The decision by the Chancellor to listen to our recommendation will give hope to thousands.

“The headline terms will be hugely welcomed by the sole traders and micro businesses that make-up 95 per cent of the small business community.

“Removing the need to provide forecasts marks an important step forward – small firms cannot be expected to predict the future in this climate.”

Mr Cherry called on the government to ensure the delivery of the loans was administered correctly so help reached the right people in time. 

”From here, we need the right delivery,” he said. “The fast-track system must be established by next Monday with money delivered 24 hours after a successful application as promised.

“All those who have been declined a small Coronavirus Business Interruption Loan Scheme facility should now be written to with the offer to re-apply via this new system.

“Many small businesses have had to pay March and April’s payroll, on top of other overheads, with no revenue coming in at all. This announcement promises to change that fundamental lack of access to working capital.”

He continued: “In the long term, we need to protect the competition achieved in the small business lending market that so many have fought so hard to secure.

“At the end of this crisis, non-bank lenders are going to be key to economic recovery as part of a thriving small business finance market that does not just rely on the big five banks.

“Equally, the big banks must ensure they are in a position to facilitate a large a number of small business loans. Some of their systems are already creaking under the strain.”

The loan scheme was also welcomed by Business West, who represent the region’s Chambers of Commerce, but Gloucestershire director Ian Mean warned that the Chancellor’s statement to the House of Commons contained some less welcome news.

He said: “The good news will be very welcome by small businesses so worried about the delays experienced by many of them in applying for cash through the government’s much-heralded Coronavirus Business Intervention Loans Scheme.

“But there was good and grim news. The Chancellor told the Commons that ‘survey evidence suggests that a quarter of firms have stopped trading’.

“He made no amplification of that alarming figure – many of them might have just paused trading, but this figure must be of great concern for our economy.”

The new loan scheme is available for firms which existed on March 1 with money due to be in accounts around 24 hours after an application is approved.

Applications are short and can be submitted online from Monday with basic details to confirm a business is eligible with tax returns required in a small number of cases.

While the Government will cover interest and fees for the first 12 months, businesses will pay back the loan at what the Treasury describes as ‘very low’ interest rates over around five years.

Meanwhile, the Chancellor has dismissed calls from church leaders for companies that avoid UK taxes by routing profits through tax havens to be barred from receiving coronavirus support packages.

Former Archbishop of Canterbury Rowan Williams was among the senior clergy who called on the Government to follow Denmark, Poland and France in refusing to help companies registered in tax havens.

A spokesman for the Treasury said: “HMRC has robust tools to challenge businesses who avoid paying their fair share of tax.

“That is the right way to challenge avoidance, not by denying support to British workers who pay their taxes and would otherwise lose their jobs.”

By Rob Freeman

Source: Punchline Gloucester

Unsecured Business Loan more lenders finance hurdles businesses small businesses
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Businesses turn to alternative money trees as big bank lending stalls

Smaller businesses are turning to alternative ways of financing in much larger numbers than five years ago, as traditional lending flatlines, according to a new report.

Marketplace business lending, which used to be called peer-to-peer, is now providing more than £2 billion a year to British small and medium sized businesses (SMEs), the British Business Bank said.

It is a 374% rise since 2014, the year the bank was set up by the government.

Meanwhile equity finance, providing money in exchange for a stake, has jumped by 131% over the same period.

Since it was set up the Business Bank has provided support to success stories such as cybersecurity outfit Mimecast, and fintech firms Transferwise and Revolut.

Earlier this week Revolut announced it had raised another 500 million US dollars (£387 million), giving the business a valuation of around £4.3 billion.

But while alternative financing has boomed in the last five years, gross lending from major banks to smaller businesses has remained largely flat, growing just 1.2% in real terms.

Gross bank lending reached £56.7 billion last year.

In 2014 it was £53 billion.

Last year 52% of smaller businesses that wanted financing looked beyond the Big Five banks, according to the research.

There is evidence that the flatline in traditional lending is due to demand from businesses drying up, British Business Bank chief executive Keith Morgan told the PA news agency.

More than 70% of them say that they would be willing to forego some future growth rather than take more loans.

Mr Morgan said that small business confidence seems to have rebounded in recent months.

“We are seeing some indication that confidence has rebounded given the additional clarity that is now present with the outcome of the general election and the increased understanding of the course with respect to Europe,” Mr Morgan said.

However it is too early to say whether that will increase demand for finance, he added.

Business Minister Paul Scully said: “Finance for small businesses is essential to our goal of making the UK the best place in the world to start and grow a business.

“This report will shape our support for business leaders across the country, so they can drive innovation and growth.”

By August Graham

Source: Yahoo Finance UK

UK SMEs
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Fears for SME retailers as banks cut lending

Bank lending to small and medium-sized retailers has fallen by 6% since the 2016 Brexit vote, while large retailers have benefitted from a 20% increase in lending.

New figures show that funds lent to SME retailers has dropped from £15.6bn to £14.7bn in the three years, accountants and business advisors, Moore. Funds borrowed by large businesses has increased from £31.5bn to £37.8bn during the same period.

In a statement, accountancy firm Moore said: “The figures suggest that some banks are favouring big businesses, [which] are typically seen as more able to repay any funds borrowed… With big retailers increasing their borrowing so aggressively, that means less finance for smaller retailers.

“As well as needing finance to see them through the current volatile trading conditions, SME retailers also need to invest to ensure their stores and overall offering remain contemporary. Without that investment, smaller retailers risk losing more ground to bigger competitors and to e-commerce.”

It also said smaller-sized businesses need funding to help prevent them from going into administration, with the number of retail insolvencies up 31% from 951 in 2016 to 1,252 on 30 September 2019.

Bridget Culverwell, director at Moore, added: “It is a real worry for smaller retailers if banks are treating them less favourably than larger retailers.

“With the final outcome of Brexit still uncertain, it is expected that banks will continue to be apprehensive to lend to the sector in the months ahead.

“Small retailers are still big employers. They occupy space in high streets where larger retailers are not present and often not interested in being present. If too many small retailers fail, then that leaves those parts of town centres with the highest level of vacant shops even emptier.”

BY KATIE IMMS

Source: Drapers

UK SMEs
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Personal guarantees are turning 50% of SME owners off business loans, weakening Brexit preparations

In recent years, many banks in the UK have offered increasing support to British businesses through access to finance. However, many SME owners are rightly concerned about the prospect of using personal guarantees when securing access to funding.

Taking a different viewpoint on the matter, Purbeck Insurance Services has suggested that small business owners should not be deterred by personal guarantees, and instead should seek out ways they could dampen the risk.

In a survey carried out earlier this year on 500 small business owners and directors, Purbeck found that while a staggering 49% had never taken out any business finance, 29% of respondents had typically called on their bank overdraft to fund their business.

What types of business finance have you ever taken out?

I have never taken out any business finance 49.00%
Overdraft 29.00%
Unsecured business loan 16.00%
Commercial mortgage 10.40%
Asset finance 9.00%
Invoice finance/factoring 7.60%
Other loan secured by debenture or charge 5.20%

Furthermore, a significant 12% of small business owners claimed to have decided against using business loans to fund their organisations as they included a personal guarantee.

Todd Davison, director of Purbeck Insurance Services, explained: “Our findings suggest that many small business owners could be looking at external finance for the first time in readiness for Brexit. It’s important they seek independent advice and consider Personal Guarantee backed finance as part of their options as they can seriously reduce the risk of these types of loans.

“As well as taking Personal Guarantee Insurance, they can also share a Personal Guarantee with fellow directors of the business, and negotiate which part of the loan is covered.”

The company’s personal guarantee insurance is an annual insurance policy that provides SME directors with insurance in the event their business lender calls in the personal guarantee, provided by the directors as part of raising business finance.

In an effort to help mitigate risk for small business owners considering opting for a business loan including a personal guarantee, Purbeck offered several tips including:

Negotiate a time limit for the Guarantee and a cap on the amount;

Educate yourself about the risks, whether you can afford to take them and always seek legal support;

Consider splitting the Guarantee between directors;

Know where your responsibilities for the Guarantee begin and end – is it loan specific or does it cover all future loans that the lender may provide?

Remember that if you have signed a Personal Guarantee for another business loan they are cumulative;

Agree terms so that the lender seeks settlement from company’s assets before enforcing the Guarantee

Confirm all points of agreement intention and expectation in writing with the lender.

Consider Personal Guarantee insurance to protect against the risk that the Guarantee is called by a lender. This will offset any outstanding obligations called in under a Personal Guarantee.

Written by Miles Rogerson

Source: Asset Finance International