Cashflow barriers a stumbling block for UK’s small firms

Slow and drawn-out financial processes are causing cashflow problems for the nation’s small businesses when they try to access finance, new research claims.

According to research from small business lender Ashley Finance, 73% of SMEs reported that the process of accessing funding in the UK is ‘long and painful’.

Given that cashflow issues are often the root cause for 90% of small business failures, the study suggests that many firms are struggling to access the finance needed to cover their operations.

The figures match further studies from the British Bankers’ Association which show that business borrowing from major banks dipped by £1.6 billion in February this year.

Alternative finance options are also available to cover any shortfalls for businesses if they cannot access finance from traditional lenders.

Funding for SMEs has proved a key issue in recent years, as many businesses have reported struggles when seeking to overcome cashflow difficulties – an issue exacerbated should the firm in question not have a good credit score.

Uncertainty surrounding Brexit has also caused issues for small businesses and a lack of finance options means those struggling

An independent business review may highlight areas of a business that can be streamlined or which are underperforming and which could be removed entirely.

A failure to source cash could see those with cashflow issues left facing insolvency, especially if a suitable alternative cannot be found.

Among the issues identified in the study were the requirements of financial institutions to have years of backdated financial information and evidence of operations.

Sourcing this information is not always straight-forward, while other firms may not meet the criteria for whatever reason.

As maintaining a healthy cashflow is an essential part of any business looking for success, the study suggests that more help and guidance should be available.

For those with cashflow difficulties, contacting a corporate recovery practitioner should help to unearth some potential solutions that can enable the continuation of trading.

By Phil Smith

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