Lack of funding causing concerns for SMEs
One in ten SMEs has come close to closure in the past 12 months as they have struggled to find finance, according to new research.
Data from borro.com, the personal asset lender, shows that many companies are still struggling despite the economy being in a general state of recovery.
One in six SMEs admitted they had sought additional external sources of finance such as increased overdrafts during the last year, while 40% said they were unsuccessful in securing it.
One in five claimed the bank wouldn’t extend their overdraft or loan, while 6% said they failed a credit check or didn’t fit the lenders’ profile.
Due to a lack of access to finance, 8% of SMEs missed payments to suppliers while 7% missed tax payments.
Worst of all, approximately 4% of businesses were forced into redundancies, although introducing corporate restructuring within a business was deemed a better way out rather than turning to administration procedures.
Where are the alternatives?
SME owners were forced to look for alternative forms of finance to raise the funds required, with many businesses more willing to risk company assets rather than personal assets.
More than a third of SMEs questioned by borro.com said they would consider releasing liquidity by selling business assets such as machinery, while a further 36% considered borrowing against business assets such as property or invoices.
But more worryingly, the threat of insolvency meant one in seven respondents would consider releasing capital from their own property, putting their home on the line.
Paul Aitken, CEO and founder of borro, said: “It is a sorry state of affairs to see the financial pressures running a business, such as meeting suppliers’ costs and paying tax bills, mean business owners are contemplating putting their home on the line.
“It’s surprising to see these results, particularly following a year of positive government initiatives to support growth in UK businesses.
“We know these things often take a while to take hold, but failure isn’t an option; in 2014 we would hope to see these small businesses, the life blood of the UK economy, gain the financial support they need and deserve.”
By Phil Smith