Lack of finance hampering small business growth

The opportunities for British small firms to grow and prosper are being hampered because they simply do not know where to go for financial help, according to new research launched by leading business cash flow specialist, Bibby Financial Services.

Over two thirds of business owners and managers (37%) are unaware of how to source additional funding with over half of respondents (56%) finding it difficult to access funding for growth. Just one in 10 owners and managers
(13%) feel they have easy access to corporate finance.

ìThese findings fly in the face of the Bank of Englandís decision earlier this year to abolish their small firms domestic banking division- a tailored service for small and medium sized businesses,î comments David Robertson of Bibby Financial Services.

ìClearly, there is a need for as much advice and support as possible for smaller firms and the Government, business advisory organisations and the industry as a whole, could start by doing more to educate the small business community on what funding options are available and how they can access itî.

The big four banks are also ëin the line of fireí. Despite numerous well-publicised initiatives over the past year, a significant 41% of business owners and managers still cite the bankís inflexibility as their primary business finance challenge. But despite their inflexibility a large proportion of businesses still obtain their finance from these conventional sources: typically 16% use bank loans and 13% a bank overdraft. However, a third of those surveyed bypass third parties altogether and instead rely on their personal savings to fund their businesses.

When asked what the best sources of funding for growing UK businesses was, 35% of owners and managers cite venture capital and 23% business angels. Yet, in practice only 12% and 2% of businesses respectively, actually manage to work with these financial partners.

Itís unsurprising therefore that a quarter (26%) of entrepreneurs consider lack of cash flow to be the biggest hurdle their business faces, while a third of respondents are most concerned about their ability to increase sales turnover during the coming 12 months.

Business owners and managers lay much of the blame at the door of the Government. In fact, 43% believe Labourís business policies are not very good at all, while a very small minority (4%) think the Government is doing a very good job.

David Robertson concludes: ìCash flow is the lifeblood of any business and the fact that the owners and managers of Britainís 3.8m small firms are struggling to access finance for growth does not bode well for UK business.

ìIt is important that owners and managers reduce their reliance on the banks. There are numerous alternative funding solutions to the traditional bank loan or overdraft, for example, solutions such as factoring or invoice discounting, which release the capital tied up in unpaid invoices, have seen tremendous growth over the past decade and are now considered a viable alternative to the more traditional forms of finance, or even asset or trade finance.î