A quarter of SMEs turn to payday finance – but are there alternatives?

The latest research suggests that more than half of SMEs would not consider approaching a bank for finance, while others were even considering payday finance as a solution.


A quarter of the managerial people at the companies questioned by Amigo Loans had already turned to a payday lender, up from 16% last year.


Last year saw 22% of companies take out payday loans while 14% preferred to receive bank funding, but are there other options?  


With many SMEs seemingly lacking the confidence or resources to source finance from banks, restructuring a company could provide an alternative option.


Considering the alternatives


Sourcing assets and aspects of business that perform poorly could be the first step to reducing unnecessary spending.


From simple steps such as saving on energy to tougher decisions like merging roles and departments, all have the potential to fundamentally change the way a business is run.


Business turnaround can potentially alter an entire business plan and drive success, but it needs to be done in the right way and at the right time.


Recognising potential issues at an earlier stage means there is more time to overcome them.


The importance of financial management


Finance is a leading part of any business plan as it funds the purchasing of goods and assets, as well as the employment of staff to sell goods.


Managing it carefully is therefore an essential aspect for any business-minded individual that is keen to experience success with their company.


If funding must be obtained, then all relevant avenues should be considered, but companies should always be aware of the risks that short-term loans can represent.


Options such as credit unions, peer-to-peer lending and guarantor loans could be an alternative, while companies already in trouble could consider receivership or administration as a viable option.


The survey from Amigo showed that 21% of businesses questioned took out an alternative loan last year to boost their finances, suggesting that some companies at least, are becoming more considerate with their money.


By Phil Smith


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