Brexit
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Brexit fear greatest among innovative SMEs

THE most innovative and “economically important” small and medium-sized firms in the UK may be hit hardest by Brexit, new research warns.

The study, from the University of St Andrews, notes Brexit is viewed as likely to result in lower levels of capital investment, reduced access to external finance, lower levels of growth, reduced product development and lower levels of business internationalisation for small and medium-sized enterprises (SMEs).

The research has found concerns about Brexit are not felt uniformly across UK SMEs. The university says the results suggest Brexit-related uncertainty is likely to affect larger, export-oriented firms in the SME bracket and those in hi-tech and service-related industries most. And the study notes innovative SMEs “seem particularly concerned by Brexit”, and may be the most negatively affected.

SMEs based in Scotland and Northern Ireland view Brexit more negatively than their counterparts in England and Wales, the research has found.

The University of St Andrews notes this in part mirrors the “differentiated voting patterns” across the UK in the June 2016 European Union membership referendum.

Ross Brown, reader in entrepreneurship and small business finance at the university, declared reduced capital investment “critically weakens and undermines” SMEs’ ability to grow and prosper.

Source: Herald Scotland

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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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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

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

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Cash flow biggest concern among UK SMEs

SMEs in the UK are increasingly concerned about cash flow, with 69% saying it is a key worry.

A market study carried out by Barclaycard showed that around one in five business leaders worry about cash flow ‘always’, while 41% are more worried about cash flow than 18 months ago.

More than one-third (38%) say they expect their level of worry about cash flow to increase over the next 18 months.

The research points to a widespread requirement for financial services, including invoice finance, to smooth out peaks and troughs in business income.

This is particularly the case in sectors which suffer from delayed payments for services, including construction.

Recent analysis by Funding Options, the online business finance supermarket, found that businesses in the UK construction sector have been hit by a leap in payment delays, with invoices taking an average of 69 days to be settled.

Slow payment of bills is a major reason why the construction sector has such a high number of insolvencies; 2,557 construction firms entered insolvency during 2016.

Despite the potential benefits of using finance, fewer than one-third of UK companies say they have used asset finance or plan to use it in the next year.

Niche bank Cambridge & Counties Bank found only 26% of companies surveyed said they were planning on using asset finance over the next 12 months.

Instead, most SME owners have invested personal funds into their companies to avoid borrowing money.

Hitachi Capital Invoice Finance looked at SME attitudes to borrowing and found that 72% of business owners have invested their own funds in the past year, with eight out of 10 using personal savings, around a quarter using credit cards and 12% using overdrafts.

For new start-up businesses, 91% of owners have invested their own money, compared to 69% for more established companies.

The research showed an aversion to borrowing money, with only 17% saying they didn’t mind sourcing finance to fund their business.

The main reason for not wanting to borrow money is that companies want to owe out as little as possible (54%).

Source: Asset Finance International

Brexit
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Agenda: The perils facing businesses which fail to plan for Brexit

DESPITE the stance adopted by Theresa May’s Government after the recent round of talks we cannot be too optimistic about the potential range of outcomes. The potential for a “disorderly Brexit” remains but now the banks can cope with it, says Bank of England Governor Mark Carney.

Attempting to instil confidence, banks have recently passed stress tests which include a 33 per cent fall in house prices, a rise in interest rates from 0.5 per cent to four per cent within two years and an increase in unemployment from its current 4.3 per cent to 9.5 per cent. But what planning are the banks doing for business customers they support? With no formal “duty of care” to their business customers how might a “sharp” Brexit restrict their ability to fund new money or maintain existing loans to business?

It’s clear that the banks will have a requirement to ensure their own balance sheet remains strong and they must also meet and pass tests as to how much cash reserves they hold. But in the heat of battle decisions must be made. Those small businesses which were trading after the financial crisis of 2008 recall the limitations to how they could invest or grow their business and, in the worst case scenarios how sudden decisions to withdraw from certain sectors saw business failures spilling over into communities: to jobs, livelihoods and families.

Our most recent research has confirmed that, even before Brexit is a reality, bank net lending to small and medium-sized enterprises (SMEs) has been collapsing.

Often SMEs are the ones that are taking the risk in innovation, or in developing new technologies – but in times of recession these types of businesses are often turned away by mainstream lenders when they should be regarded as even more vital to raise productivity and grow the economy out of a downturn.

If banks are stress testing their own businesses, how then are business customers stress testing theirs and working out what they should do? Our interim report, Brexit & Scottish Business, reveals that many businesses are still failing to undertake even the most basic planning for an orderly Brexit never mind the disorderly Brexit that is actively being considered by banks. Business owners cite “uncertainty” as to why they are failing to plan, with some living in the blind hope that Brexit will not take place at all.

Some businesses are taking advice on what to do. That advice is mostly being sought from Government agencies or from business bodies such as the CBI, the Institute of Directors, the Federation of Small Business or their local Chambers of Commerce. Ironically, it is the banks themselves that are being consulted the most infrequently with lack of trust in banks being a prime factor.

Thus, business is often not planning, banks are planning only for themselves and the Bank of England is actively conceding there could be “economic pain” for business and households. “Fail to plan – or plan to fail” is the mantra by which all business, regardless of sector or scale must live. For now that might mean stockpiling cash, ensuring credit lines remain secure and so forth. Diversification could be considered by some. Price rises in supply chains could be modelled to ensure sufficient profit is baked in.

This is a time for action particularly for the small, inexperienced or exposed businesses that have the lowest capital reserves. Businesses no less than banks need to be able to cope with a “disorderly Brexit”.

The uncertainty and lack of planning in business presents both the UK and the Scottish Government with a major policy challenge. Government, too, must take action to support business. As with business, to do nothing would be to invite failure.

Source: Herald Scotland