Lack of financial awareness stalling SME growth
SMEs across the UK could still be missing out on financial opportunities despite a burgeoning economy, according to new research.
There are now more than five million SMEs in the UK and widespread media reports suggest many are in the process of expansion.
However, research from AXA Business Insurance has hinted that finance remains the largest barrier to growth.
Some 44% of SMEs questioned have relied on some form of credit in order to fund their business – from an overdraft or credit card to looking to friends to supply additional cash.
In addition to this, a further 20% had taken out a bank loan in order to build business and keep trading, while only 12% had accessed funding in the past 12 months.
Only 5% of businesses had taken advantage of the funding for lending scheme, 6% used Enterprise Investment Schemes or Seed Enterprise Schemes and 7% took out a government loan.
Understanding the available funding options
Given the large proportion of businesses that are still looking to expand in 2014, around 60% will need funding to do so - growth could be limited in instances where accessing this level of finance is not possible.
A lack of understanding of the schemes on offer could be severely disrupting potential growth, according to the survey.
This lack of knowledge could have a negative impact on businesses that do not regulate their cash flow, as potential issues could cause far greater problems in the long-term.
Considering the prospect of corporate insolvency procedures should be done as early as possible if financial issues have been identified, as it represents the best chance of finding a solution.
Suitable alterations can subsequently be made to the business to lessen the likelihood of falling into administration or liquidation.
A lack of awareness relating to recent government policy changes was also noted in the research, although a quarter of SMEs did believe that the government was now more focused on smaller businesses.
By Phil Smith