SMEs making greater efforts to avoid debt

SMEs across the UK are looking to avoid taking on greater levels of debt, according to a recently published report.


The Owner Managed Business (OMB) Barometer report from the Bank of Cyprus UK suggests many SMEs are looking for alternative means of financing their businesses.


It revealed that nearly six in ten OMBs has ‘no requirement for additional finance in the last quarter’, while a third has opted to inject personal funding into the businesses.


This is done as an alternative to seeking external funding, meaning the businesses are not facing extra debt as a result.


Tony Leahy, at Bank of Cyprus UK, said: “Given the prolonged difficult climate that OMBs have had to manage through, any signs of optimism should be welcomed and supported.


“Whilst businesses are right to keep a tight grip on their credit management and cash flow until recovery is more evident, it is disappointing that many respondents lack confidence that their bank would support them with additional facilities if needed.”


Slightly more than one in ten respondents planned to apply for increased facilities from their bank during the course of the next year.


Meanwhile a similar number cited access to funding as being a significant barrier to their potential growth, a goal which all SMEs are striving for as the UK economy continues to show positive signs of recovery.


OMBs were taking a pessimistic view on new facility applications as only a quarter of respondents felt they would see a positive outcome were they to apply.


Mr. Leahy said: “To support recovery, it is vital that OMBs and their banks are engaged in dialogue, to avoid any shocks, but also to remove any doubt or uncertainty that may inhibit confidence in planning for the future.”


By looking to avoid debts it would appear that many businesses are unsure of what the future might hold and are holding back some of their resources as a result.


If the economic trends continue to show signs of recovery then it would seem likely that lending would increase again.


By Phil Smith

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