01923224411 |
By Paul Windmill
Director
Posted on: 11 January 2018

Supporting the life of SMEs

Even though a decade has passed from the 2008 financial crisis, SMEs in the UK feel as though the decreasing access to appropriate finance is hindering their ability to reach their full potential. This is confirmed in the governments Industrial Strategy Report which identified financing as the main problem for SMEs wanting to expand.

Funding for SMEs

Research carried out by Hitachi Capital Business Finance found that two-thirds of SMEs with growth strategies fear that their plans for expansion could be disrupted if they cannot secure appropriate finance. Furthermore, a third of SMEs applying for finance are not securing enough funding to support their investment plans. A further study carried out by Close Brothers Group found that a quarter of SMEs think funding is still too expensive.

However, alternative finance may be the answer to SMEs problems. Cambridge Centre for Alternative Finance (CCAF) revealed that the market grew by 43% in 2016, with £4.6 billion of funding generated. Approximately three-quarters of this finance went to start-ups and SMEs. Platforms such as Funding Circle have popularised peer to peer business lending. Last year, the platforms generated £1.23 billion and was the single largest market segment. Furthermore, other types of alternative finance, such as peer to peer property lending alone increased 88% from 2015, raising £1.2 billion. Finally, Invoice trading provided £452 million and equity-based crowdfunding generated £272m.

What to do if you are rejected for a loan

With Britain’s banks turning away up to one in four SME finance applications, it is imperative for them to refer businesses to alternative providers, and since this has come into effect, over one hundred SMEs have benefited.

Every year, larger banks are turning away around 100,000 small businesses a year, denying them access to £4bn of funding. However, there are steps to take if you are denied finance. If businesses are of the opinion that their rejection by the bank was unfair, SMEs are eligible to appeal the decision. With appeal procedures now set out by regulators, it is evident that increased numbers of SMEs are successful. However, it is suggested that an appeal is only carried out if your business requires bank finance specifically. 

If it is not bank finance your business requires, there are other alternatives. For example platforms provided through the bank referral scheme. A scheme set up to make it a legal requirement for banks to refer you to an alternative provider. With the SMEs consent, three online platforms are approved to receive these referrals. These platforms include Funding Options, Business Finance Compared, and Funding Xchange.

With SMEs accounting for at least 99.5% of the businesses in every main industry sector, and accounting for 60% of all private sector employment, it is clear they are the future of our economy. It is therefore vital for funding to be available for SMEs in order to survive.

 

Paul Windmill
Director

Paul has over 25 years’ experience working with a wide portfolio of clients, both very large and small across the South East. Paul advises on corporation tax planning and remuneration planning for company directors and senior management, as well