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Bridging the Credit Gap: How SMEs can Overcome the Barriers to Accessing Finance

SMEs are widely perceived to be the backbone of the UK economy, accounting for three-fifths of employment and around half of turnover in the UK private sector. Despite this, while lending to large corporates has steadily risen, growth in lending to SMEs has been stalling since even before the Covid-19 pandemic. Indeed, new findings from Codat cite that almost half of SME owners who are in the market for credit said they find it difficult to access external capital.

With the success of these companies crucial for the wider health of the economy, the Federation of Small Businesses warned last month that further barriers to finance for SMEs will stifle economic growth at a time when it is sorely needed, given many believe the official announcement of a recession is just weeks away.

Put simply, the existing credit landscape is not set up for SMEs to succeed, and there is an ever-widening gap between the financial support they and their larger counterparts are able to secure. Bridging this credit gap is key to addressing how businesses can not only remain resilient in unfavorable economic conditions, but strive for growth and thrive in the long term.

Looking outside of traditional channels

When looking to explore finance options to fund business investments, many SMEs will approach their bank by default. However, while the wider finance industry has evolved considerably, high-street banking remains somewhat antiquated. NatWest, for example, announced in October that it will be closing 43 of its branches across the UK, exemplifying how the traditional role that banks once held – providing customer service, a personal relationship with a bank manager, and reliability – is slowly disappearing.

When it comes to finance options being offered by banks, the routes to obtaining credit remain limited, making it all the more likely that a business will be unsuccessful in its application, or may make funding assessments based on surface-level information, rather than considering the wider business story. This may mean a business owner is either turned away immediately, preventing them from obtaining the financial support they need to grow, or commit to a product that isn’t suitable.

Clearly, an alternative option is needed. With the bespoke guidance that would have traditionally been provided by a bank generally no longer available, the road has been paved for others, such as finance brokers, to step in.

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Considering suitability of debt

Exploring all potential finance avenues will be crucial to solving the issue of the credit gap. All too often, SMEs take out the wrong financial product for their needs; sometimes due to a lack of understanding surrounding their options, and sometimes due to insufficient or poor guidance being offered.

Fewer than one in ten (9%) small firms applied for finance in Q1 2022, according to the quarterly Small Business Index (SBI), plummeting to the lowest level on record. This decline is being exacerbated by a difficult application process for default finance options that are too basic and frequently unsuitable – solely offering fixed-term loans or increased overdrafts, for example.

Nevertheless, appropriate alternative forms of funding can be secured through different channels – specialist finance brokers for SMEs can offer their expertise with regards to products that can directly facilitate productivity and growth.

For example, the relatively new Business Cash Advance has low barriers to entry in terms of eligibility criteria and is an ideal option for sectors and businesses that tend to experience uneven cash flow: they may see seasonal rises and falls in revenue or may struggle with customers paying invoices on time. These cash advances are repaid as a percentage of card sales and therefore are aligned with performance, making them far more flexible and easier to access than many more traditional forms of finance.

Leveraging assets

Accessing the right finance options can often seem like a challenge for SME owners, particularly in a time of economic downturn, and many may not be aware of assets they have that can be leveraged to secure finance. Asset finance is an often underused but effective solution that can present working capital solutions at a lower entry point.

From an external viewpoint, finance brokers can often identify opportunities – anything from medical equipment to agricultural machinery to telephone systems can be considered a valuable asset, and businesses can benefit from the debt being secured against the asset. For example, where businesses own existing assets outright, these can be refinanced to demonstrate a lower risk level to a lender, rather than raising ‘riskier’ new debt. Ultimately, this represents a cheaper form of debt that is more appealing to lenders when appetites for risk are low.

SMEs struggling to meet ever-increasing eligibility criteria required to get their foot in the door with banks means that accessible financing plans have become more important than ever before. Finance brokers with a better understanding of SMEs’ needs have a crucial role to play, going forward, and must step up to ensure that their diverse needs are met.

In challenging times of economic downturn, having access to tailored solutions and bespoke guidance can make a world of difference. Ultimately, successfully navigating our way through business challenges and into sustained productivity and growth will require brokers to take a hands-on, consultative approach to ensure that SMEs continue to grow and thrive on a long-term basis.

By James Cook

Source: Business Leader

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How Can Young People Make It As Entrepreneurs In Today’s Economic Climate?

Starting a business on your own has never been an easy path to follow, but for those who take the plunge, it can be a rewarding one. No matter what your first entrepreneurial project is, support is always necessary, whether that’s your family helping you to pack your first shipment or financial assistance from government schemes.

Making your way in business continues to be difficult in the wake of recent global events and given the difficult economic landscape young entrepreneurs are faced with today, you could argue that the hill to climb is steeper than ever. Those odds can seem even slimmer when almost 60% of small businesses fail in their first three years of life. While there are barriers, there are also ways for young people to find the support they need and overcome those hurdles to enjoy business success.

The power of social media

Social media is one of the great levellers for businesses around the world. While funding issues and skills gaps are hurdles to overcome, when marketing online, you find yourself with the same opportunities as large corporations through social media. Companies that can generate a huge following through original content can then translate that presence into sales.

For example, the parkour brand STORROR gained a following of millions through its YouTube videos before successfully segueing into the world of parkour clothing. Or take the Dollar Shave Club, which began with a viral video in 2012 that acted as the launchpad for the company’s continued success.

Financial business support for young people

Starting a business requires investment, be that from your own wealth, that of your family, or from investors and banks. But most young people haven’t had the time to build up significant investment funds so they need to come from somewhere else. Fortunately, there are several avenues for young entrepreneurs to pursue when seeking funding support for their businesses.

Small business loans

Small business loans from the bank are typically between £1,000 and £50,000 and should provide enough capital to start most entrepreneurial ventures. But you will need to present your case well to the bank as they need to be convinced that you are a sound investment. Similarly, young entrepreneurs can seek help from the government with a Start Up Loan that ranges from £500 to £25,000.

You must create a business plan that is complete with facts, figures, and projections so you must do your homework and thorough market research for a successful loan application. Outlining in detail how you will use the investment and what your strategy will be are also important to put forward to earn the trust of bank loan managers.

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Crowdfunding

The benefit of crowdfunding investment is that you already have interested parties in your products, services, and brand before you kick things off. This process allows entrepreneurs to raise funds for their business online by offering a small stake in the company. It is similar to selling shares and some companies have raised millions of pounds through micro-investments.

Small business grants

Government grants are available for startups to help cover the costs of buying equipment, premises, and other essential infrastructure. These can be tricky to apply for as each grant provider is looking for different things, and you don’t want to waste precious resources trying to obtain a grant that you aren’t eligible for.

You may also be eligible for green business grants that aim to help companies become more sustainable and environmentally friendly. This can help with installing LED lights, insulation, more efficient heating, or alternative energy sources.

Improving your skills

To run a business well you not only need to have the technical expertise for your chosen field but you also need to understand the finances involved, how to manage people and supply chains, and keen problem-solving skills. You may wish to figure things out as you go but it can be helpful to give yourself a sound foundation in some of the skills you will need for success.

Consider entering a mentorship program to have someone with experience take you under their wing or try youth entrepreneurship schemes that aim to improve and develop your business leadership skills. For example, Youth Business International equips disadvantaged young people to help them build the skills, confidence, and connections they need to beat the odds and become successful business owners.

Digital skills for social mobility

Given the range of barriers along the way, such as poverty and social inequality, social mobility in the UK is difficult for many to achieve. But technology is providing a springboard for social mobility as the demand for digital skills continues to rise. From cybersecurity services to digital marketing and content creation, there are a host of startup ventures that young entrepreneurs can embark on that leave traditional business models in the past.

Source: Shout Out UK

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UK Finance Reports a Shift in Lending Needs for SMEs as Caution Rises

UK Finance today releases its latest Business Finance Review which reports on the finance needs of small and medium-sized enterprises (SMEs).

Our latest review shows the expected slowdown in lending to SMEs following a reduction in applications for finance – particularly loans – in the previous quarter. SMEs’ demand for finance continues to be muted this year as they become more cautious because of the uncertain year ahead.

Gross lending

The figures from Q3 showed a continued softening in applications for finance from SMEs. Overdraft applications continued to trend up in the third quarter, but demand for loans fell.

Gross lending through loans and overdrafts to SMEs edged down to £4.5 billion from £5.1 billion in the previous quarter. In London, this represents the second quarter of declining lending values. The South West also saw a marked drop which could be due to the decline in finance applications from the agricultural sector, which is highly represented in the region. For other regions of the UK, lending remains stable and similar to pre-pandemic levels.

Meanwhile, overdraft applications represented the highest volume of applications since Q1 2020. This points to cashflow management and working capital requirements rather than business development.

Invoice finance and asset based lending (IF/ABL)

IF/ABL advances continued to grow and have now surpassed those reported in 2020 Q1, approaching the levels seen in 2018/19. There have now been nine consecutive quarters of growth, with advances at the close of Q3 2022 standing at almost £22 billion.

Data shows that there was strong growth in the number of the clients that are supported, with total client sales up 14 per cent. IF/ABL business continued to have access to funding in existing facilities.

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Deposits

We continue to see relatively modest changes in the aggregate picture across SME cash deposits.

At the end of Q3 total deposits fell by just under one per cent compared with three months previous, and by two per cent relative to the same period a year ago. This does however vary by sector. There has been a somewhat larger drop off in deposits in accommodation and food services, and health and social care. In contrast, cash deposits were higher in construction and real estate.

Source: UK Finance

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89% of SMEs intending to borrow over the next year to help them stay afloat

Demand from SMEs for lending is set to increase in the next 12 months, as 89% of businesses look to borrow to stay afloat, cover overheads or refinance existing debt.

That’s according to a recent survey from Allica Bank, which polled 150 established businesses (those with 10-100 employees) on their outlook for 2023 – a year that looks set to be dogged by recession, inflation and rising interest rates. More than two in five (43%) said they will need to borrow simply to survive, while nearly the same proportion (37%) are doing so to refinance existing debt.

It follows the British Business Bank reporting that while total debt held by SMEs reached new highs during the pandemic in 2020, loan repayments have been becoming a smaller share of business cashflows as turnovers have started to recover.

Allica Bank claims that the lack of information available to businesses about financial products makes this trend especially concerning, with 10% of respondents saying they needed more clarity about borrowing and 17% saying they wanted a greater selection of loan products to choose from.

The bank says this could lead to a growing number of businesses becoming over-leveraged, or missing opportunities to support growth. Recessions often lead to a higher proportion of defaults on business loans, while the Coronavirus Business Interruption Loans (CBILS) is already seeing an 8% default rate, amounting to over £6 billion, according to the government’s latest report.

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Conrad Ford, Chief Product Officer at Allica Bank, says it’s vital for the UK economy that businesses are made aware of the products available to them and get the expert attention they deserve: “It’s the responsibility of banks to give businesses the best chance of surviving and thriving through this recession by ensuring they can make informed choices.

“This needs to be backed up with fast and clear responses to loan applications, so that businesses aren’t waiting weeks for an answer. While banks should actually look individually at each application and assess each business on their own merits and opportunities.

“Fewer and fewer banks still offer their customers a proper relationship manager – someone that can walk business owners through their available options and help them make an application. At Allica Bank, we make relationship managers a core part of our offering for our business customers because we know how valuable their expertise can be. Especially as the economy is expected to enter recession.

“We also recommend businesses consider speaking to their accountant or a commercial finance broker for support when looking at their finance options.”

By James Cook

Source: Business Leader

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Festive cheer: SMEs to reward employees with 120 million extra days off

Small and medium-sized businesses are set to reward their employees with 120 million extra days off as the cost-of-living crisis bites.

More than half a million UK small and medium-sized enterprises (SMEs) are spreading festive cheer among their workforces by giving the gift of time, according to the latest quarterly SME barometer from Barclays. One in ten SMEs said they would be gifting each employee 2.5 extra days leave, on average, meaning that workers across the country will receive 120,345,602 days off cumulatively, the bank said.

People working in the hospitality and leisure, and manufacturing sectors will get even more time off, with 3.5 days and three days of additional holidays, respectively. The Barclays research found that 41 per cent of SME employers believe staff activities leading up to the festive season contribute to employee retention. Similarly, nearly a third (30 per cent) of Scottish employees say they are less likely to look for another job if their employer organises activities to reward staff over the festive period.

Of employers who are seeing an increase in demand for benefits from new employees, more annual leave is one of the top three benefits being requested by existing employees. In addition to providing time off, about two fifths (44 per cent) of SMEs will be hosting end-of-year parties, spending an average of £56 per head on festivities, while 41 per cent will be closing offices between Christmas and New Year and 25 per cent will be awarding Christmas bonuses.

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According to the latest barometer, more than half (55 per cent) of UK SMEs reported their total revenue grew – with turnover up around 9.1 per cent year-on-year, on average. Some 51 per cent of UK SMEs reported turnover growth in the third quarter of 2022 compared with the second quarter, consistent with data from Barclaycard Payments, which showed a modest increase of 5.2 per cent in the value and 4.4 per cent in the volume of payments made to Scottish SMEs between July and September this year.

Festive cheer and optimism are, however, dampened by the cost-of-living crunch as nearly half (47 per cent) of UK businesses are worried about their prospects heading into the new year. Some 68 per cent of firms are concerned about the negative impact that rising energy bills will have on their business, with 26 per cent feeling very concerned. Larger businesses are feeling the pinch too, with nearly two-thirds (59 per cent) predicting a decrease in consumer spending and 41 per cent worrying about their businesses prospects as they approach 2023.

Colin O’Flaherty, head of SME at Barclaycard Payments, said: “The upcoming festive period will be our first since the pandemic without restrictions, with employers and employees looking to make the most of it. While it’s been yet another challenging year for businesses, many SMEs are looking to inject some festive cheer by rewarding their employees, as business owners are aware of the positive impact that employee morale can have on staff retention. Our research shows that although owners are very aware of the difficulties to come, they remain resilient in the face of rising costs.”

By Scott Reid

Source: The Scotsman

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Retail the only SME business sector to decline in past year, research shows

Retail was the only small business sector in the UK to record a fall in sales in the year to October. According to Xero’s Small Business Index, based on anonymised and aggregated data from hundreds of thousands of small businesses, showed that UK retailers experienced a 5.1% drop in sales in October.

While sales among the broader small business economy rose by 4.6% year-on-year (y/y), following a 7% rise in September. This shows the stark situation for independent retailers as they enter their busiest time of year.

Despite the sales rise amongst small businesses as a whole, once adjusted for current high inflation – using the ONS Consumer Price Index (CPIH) of 9.6% for October – sales actually fell 5% YoY. That is, the rise in national sales was due to price increases rather than small businesses selling more goods and services.

The struggles of small retailers are further evidenced by a 6.6% YoY decline in the number of people being employed in the sector, while wages rose 4.7% YoY in October. This suggests that retailers are offering higher salaries to attract staff ahead of the festive season.

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Alex von Schirmeister, UK Managing Director, Xero, explains: “As the festive shopping period kicks off, independent retailers need our support more than ever before. They don’t have the large marketing budgets to promote Black Friday deals. Last week’s Autumn Statement offered little respite, so these hard-working businesses will be feeling the pressure to make up the current sales shortfall and manage recruitment challenges. We’re calling for immediate action from policymakers to ease the burden and provide some much-needed stability.”

XSBI data for October also revealed that small businesses in the North of England are struggling. The regions that saw the largest declines in jobs were Yorkshire & the Humber (-7.7% YoY), West Midlands (-7.6% YoY), East Midlands (-7.3% YoY) and the North-West of England (-6.7% YoY).

This pattern is similar when it comes to sales. London experienced the strongest growth (+7.3% YoY), while Scotland (+3.1% YoY), East Midlands (+3.5% YoY), West Midlands (+3.9% YoY) and Yorkshire & the Humber (+4.6% YoY) experienced the lowest sales growth.

Meanwhile, the length of time small businesses wait to be paid rose by 0.6 days to 30.5 days in October. This is the sixth increase in payment times in the past seven months.

On average, late payments to small businesses by their customers increased again by 1 day, up to 8.3 days. Payments are the latest they have been since August 2020. Waiting longer to be paid puts additional stress on small business owners as they navigate their own rising bills.

Government called on to act

Last week, Xero unveiled a new report at the House of Lords that outlines a four-point plan to support small business recovery, including policy recommendations for the UK Government. This included:

• Building a growth strategy for small businesses, with government asked to act to create policy that has SMEs at its heart;

• Getting government to tackle late payments with a range of measures from introducing e-invoicing to regulating payment times;

• Promote the use of accountants and bookkeepers in helping run businesses, while also pushing more students to move to accountancy to avoid a future dearth;

• More investment in digital skills, tech and infrastructure, as well as reducing the tax burden on training and reskilling.

By Paul Skeldon

Source: Internet Retailing

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Keeping it in the family? SMEs divided on working with relatives

SME owners are split on whether to keep their businesses as a family affair or not, according to new research by small business lender iwoca. Just two in five (41%) SME owners say they would give a job to a family member if they asked – by contrast, nearly one in three (30%) said they would not employ a relative.

This split reflects current small business arrangements – just over half (54%) of small business owners say they do not work with family in any capacity. Of those who do work with family, one in four (26%) small business owners works with their partner and one in twelve (8%) works with their child.

Steptoe and Son or Succession?

Those who choose not to work with family are clear on why: two in five (39%) small business owners report wanting to keep family and business life separate. One in ten (11%) say they want their family to forge their own path – indeed, more than a third (35%) of SME owners surveyed say it is unlikely that their children would join their business. Interestingly, a tenth (10%) believe their relatives can find a better career outside of their industry.

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Improving family bonds

Despite a minority of SME owners employing relatives, those who do work with family members see it as a positive. Almost two thirds (64%) of SMEs report that working with their relatives had a positive impact upon their relationships, with only a small fraction (7%) of SME owners reporting a negative impact.

Those small business owners who do work with their family cite trust as a significant positive, with a quarter (25%) saying that they trust family members to do a better job than a stranger.

Seema Desai, COO at iwoca added: “For some, working with family members could be one of the best decisions they ever make, but, of course, it won’t work for all. Try to make an objective assessment about what your family member can add that is currently lacking in your business, and whether you could both maintain the right guardrails to protect both your professional relationship and your personal one. Clear roles and responsibilities will be crucial as you look to grow and build a successful venture in the future together.”

Lottie Whyte is co-founder and CEO of MyoMaster, which she set up with her husband, Joe. She says: “I co-founded a business with my husband Joe three years ago, and for the most part it works incredibly well. There are three key reasons for this, the first is commitment – the work is all consuming and if I’d been married to someone who wasn’t in the business with me I’m pretty sure I’d be divorced by now! The second, trust, is vital and it’s great being able to start with a foundation already so strong. And finally, speed – being able to skip the pleasantries and communicate efficiently has been crucial.

“There can be drawbacks of course, from never being able to switch off from work and the constant pressure to build our global business can sometimes spill over into our personal relationship in a negative way. But overall, my husband and I already have a long history of working well together, from organising our three day wedding to managing house renovations – we know how the other one works.”

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4 Benefits Of Opening A Business In The UK

If you’re looking to start a business, the United Kingdom is a great place to do it. There are many benefits to opening a business in the UK, including a strong economy, a favorable business environment, and access to resources. This article will discuss four of the biggest benefits of opening a business in the UK. Let’s get to the details.

Availability of Essential Services

The UK has a world-class infrastructure and provides businesses with access to essential services, including transport, energy, water, and telecommunications. This infrastructure is vital for businesses to operate effectively and efficiently. For instance, UK PEO can help you set up your business quickly and efficiently by getting you reliable employees and HR services. This ensures that you don’t struggle much when starting your business in the UK.

However, when seeking these services, it is important to ensure that you get them from reputable and reliable providers. For instance, you should ensure that the PEO you choose has a good reputation and is accredited by the Better Business Bureau. You can also ask for recommendations and read reviews to understand what other business owners think about the services.

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A Favorable Environment for Businesses

The UK government has implemented policies and regulations that create a favorable business environment. For instance, the tax regime in the UK is conducive to businesses. The corporate tax rate is only 19%, which is significantly lower than the rates in other countries. This makes it easier for businesses to profit and reinvest in their growth.

In addition, the UK has a highly skilled workforce. The education system in the UK produces workers with the skills and knowledge that businesses need to compete in the global economy. This gives businesses a competitive advantage and helps them to grow and succeed. The UK also has a strong legal system that protects businesses and their interests. This gives businesses the confidence to invest and expand their operations in the UK.

Access to Global Markets

The UK is a leading global economy, and its businesses have access to numerous global markets. The UK’s membership in the European Union gives businesses preferential access to the EU’s single market of 500 million consumers. The UK is also a member of the World Trade Organization, which provides businesses with preferential access to global markets. This makes it easier for businesses to export their products and services to new markets and grow their business.

In addition, the UK has a network of Double Taxation Agreements with more than 100 countries. This makes it easier for businesses to operate in multiple jurisdictions and reduces business costs. The UK also has several Free Trade Agreements with countries around the world, which gives businesses preferential access to these markets.

Supportive Government Policies

The UK government is supportive of businesses and entrepreneurship. The government offers a variety of programs and resources to help businesses start and grow. For example, the government offers tax breaks for businesses investing in research and development. The government also provides loans and grants to businesses to help them expand their operations. In addition, the government offers various business support services, including advice on starting and growing a business.

The UK government is also committed to attracting foreign investment. The government offers several incentives to businesses looking to invest in the UK. For example, the government offers tax breaks for businesses that create new jobs. The government also offers loans and grants to businesses to help them expand their operations.

The UK is an attractive place to start and grow a business. The country has world-class infrastructure, a favorable business environment, access to global markets, and supportive government policies. These factors make the UK an ideal location for businesses starting and growing their operations.

Source: Finance Monthly

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More than 3 million of UK SMEs are unable to grow without funding

The majority of small and medium-sized enterprises (SMEs) in the UK require funding to overcome cashflow issues and pursue their growth plans, new research from Channel Capital (Channel) has found.

The UK-based, FCA-regulated asset manager commissioned a survey of 506 senior leaders within UK SMEs. It found that 59% of businesses currently need funding to ease day-to-day cashflow issues – that equates to 3.29 million SMEs, while more than two-thirds (68% or 3.80 million) need funding to grow.

There are 5.6 million SMEs in the UK, accounting for 99.9% of the business population as well as three fifths of the employment and around half of turnover in the UK private sector.

Despite the demand for an injection of capital, Channel’s research showed that SMEs are struggling to find suitable lenders. Just 51% said it is ‘easy’ or ‘very easy’ to find an SME loan.

Just over half (54%) of UK SMEs think big banks are too slow in assessing business loan applications, with 47% saying high street banks are reticent to lend to smaller businesses.

Almost two in three (65%) respondents said they are open to using alternate lenders for SME finance options, compared to 31% who said they would only trust a high street bank for a business loan.

Elsewhere, Channel’s study revealed that, of those SMEs which have applied for a business loan in the past, a fifth (20%) thought the process was ‘difficult’ or ‘very difficult’.

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Walter Gontarek, CEO of Channel, said, “From Brexit to the pandemic; the cost-of-living crisis to government fiscal U-turns, the past five years have been hugely challenging for SMEs – and financial planning is extremely difficult in the face of so much political and economic uncertainty, as our research has shown.

“Millions of SMEs need funding to soothe cashflow headaches or, crucially, to pursue growth strategies. Yet unfortunately, accessing that finance is notoriously difficult. Our study highlights the poor experience SMEs often have with big banks’ reluctance to lend, not to mention complex and time-consuming application processes with no guarantee of approval.”

Ion Fratiloiu, CCO of Channel, added, “Accounting for three-fifths of employment and half the turnover in the UK private sector, we must better support SMEs with easier access to finance.

“The SME loan market needs to undergo the same level of disruption as consumer loans have, with technology-led and online lenders coming to the fore so borrowers can enjoy the benefits of greater choice, speed, and transparency.

“Positively, our research shows SME leaders are open to working with alternate lenders, including digital lenders, so we’re confident that improving access to finance will open up many new opportunities to these businesses.”

Source: London Loves Business

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Frustrated businesses screaming for fresh cash struggle to get bank loans

Three-fifths of small and medium-sized enterprises (SMEs) said that they currently need funding to ease day-to-day cashflow issues, according to research by asset manager Channel Capital out this morning.

However, those businesses increasingly struggling to get loans from high-street banks, the survey found.

And more than two thirds of SMEs reported that they need funding to grow.

With around 5.6m SMEs in the UK, that means that about 3.3m need to access finance to help them stay afloat during an extremely challenging time for businesses, Channel said.

But business owners are facing roadblocks when it comes to receiving loans because of a reluctance among high street banks to lend to smaller firms, the survey found.

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Too slow and reticent
Over half of the more than 500 business leaders surveyed said that they think high-street banks are too slow in assessing business loan applications, and just under half felt that they are reticent to lend to smaller businesses.

It comes as a number of banking giants reiterated that they had strict affordability tests when it comes to lending, but have set aside millions of pounds to deal with potential defaults amid cost-of-living pressures.

NatWest said it was introducing targeted lending packages for the most badly affected sectors, such as farmers who are facing a plethora of cost challenges.

But SMEs said that they are open to using alternative lenders for finance options rather than relying on big banks for loans, Channel’s survey showed.

Walter Gontarek, the chief executive of Channel, said: “From Brexit to the pandemic; the cost-of-living crisis to Government fiscal U-turns, the past five years have been hugely challenging for SMEs – and financial planning is extremely difficult in the face of so much political and economic uncertainty, as our research has shown.

“Millions of SMEs need funding to soothe cashflow headaches or, crucially, to pursue growth strategies.

“Yet unfortunately, accessing that finance is notoriously difficult.

“Our study highlights the poor experience SMEs often have with big banks’ reluctance to lend, not to mention complex and time-consuming application processes with no guarantee of approval.”

The firm added that smaller businesses need to grow to help boost the economy, because they account for a big proportion of the UK’s employment and turnover.

By MICHIEL WILLEMS

Source: City A.M.