2/11/2018 Debt - The Elephant in the RoomRecently published statistics indicate that only 34% of SMEs are using external finance, while only 47% are planning to grow in the coming 12 months. Could this indicate that SMEs are lacking the funding to expand? Or could it be that SMEs are lacking information regarding how debt finance could benefit their business?
Those SMEs who have borrowed in the last 12 months have generally used finance for expansion (29%), working capital (28%) or purchasing capital equipment (22%). In addition, around 2 in 3 of these borrowers have used finance provided by their main bank. 85% of SMEs are using finance provided by a company with whom they have an existing relationship, whether a bank or another provider. Contrary to the common media rhetoric, only 12% are being declined when applying - a real positive message. One concern amongst the statistics is that only 4 in 10 businesses are consulting a professional advisor or finance provider about funding. This can be so valuable in finding the right structure and cost of funds. At Liquidity Club we have seen numerous businesses able to release far more cash, or save money, when moving to new providers compared with their incumbent provider. Yet only 7% of SMEs, in the statistics, have moved to a new provider in the last year. Perhaps this highlights the need for more information being made available to directors of SMEs. Equally, it may be that increasing choice of providers, complex terminology and the number of different products can be confusing for those directors of SMEs. For any who agree with these sentiments, we would welcome a conversation about debt funding to break down some of these barriers. All statistics sourced from BVA BDRC: http://www.bva-bdrc.com/wp-content/uploads/2018/10/BDRC_SME_Finance_Monitor_Q2_2018_Final.pdf |
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