According to the latest Bibby Financial Services small business survey, the three biggest problems facing owners and managers today are all related to the burning issue of raising finance. The biggest headaches for Britainís bosses are:
Dealing with a lack of cash flow (79 per cent)
Increasing sales turnover (68 per cent)
Funding the purchase of new equipment (59 per cent)
With a third of all new firms failing within the first three years of trading and most small businesses going into receivership due to a lack of available finance, it is perhaps no surprise that money matters figure so highly in the list of owners and managersí concerns.
It may, however, be small businesses themselves who are to blame for their cash flow headaches. The research showed that the vast majority of firms just do not consider all the finance options available to them, with almost two thirds (62 per cent) immediately resorting to extending their bank overdraft or personal loan when faced with money headaches.
Furthermore, almost a quarter (22 per cent) skip the external funding route and dip straight into their own personal savings when their cash flow grinds to a halt. Just 16 per cent of owners and managers look at alternative finance options such as factoring or invoice discounting to improve their money situation.
These findings are backed up by a recent joint survey carried out by Envestors, the private investor network, and Cranfield School of Management, which found that entrepreneurs and growing businesses are missing out on suitable funding solutions by failing to research the different finance options on offer. The survey found that despite there being 19 different sources of finance available to small and medium sized businesses, those firms struggling to bridge the equity gap are failing to improve their chances.
According to the Bibby Financial Services research, 89 per cent of entrepreneurs who do not consider alternative funding options such as factoring, invoice discounting, venture capital or business angels, fail to do so because they do not understand how the different kinds of finance work. This suggests that owners and managers are not doing their homework properly when it comes to making finance decisions.
Commenting on the findings, David Robertson, Chief Executive of Bibby Financial Services, said, ìNo matter what size, sector or how great the business plan is, all firms need one thing - money and plenty of it. Cash flow is the lifeblood of business and unfortunately many small firms are missing a trick by failing to examine all the options available to them. There are many reasons why fledgling businesses face cash flow difficulties, but there is so much that owners and managers can do to improve their chances. There is a vast array of finance options available to small and medium sized businesses from factoring and invoice discounting to the Small Firms Loan Guarantee Scheme and by doing a bit of ground work and undertaking simple research, owners and managers can significantly improve the odds in their favour.î
Bibby Financial Services can help growing businesses to improve their cash flow situation by releasing the funds tied up in the firmís assets, be they unpaid invoices or plant and machinery. These funds can then be used to help the business realise its plans for growth and move the business forward.
Big Headaches for Small Businesses
Being your own boss is a pipedream for many aspiring entrepreneurs, but for the 3.8 million small business owners and managers in the UK today, it is not without its headaches.