More than 1 in 4 UK SMEs are planning to raise finance just to keep their head above water, a new survey has revealed. Liquidity is essential for a business to grow, and that’s exactly the main reason why those 28% of the SMEs plan to apply for new business loans: to improve cash flow. Following shortly, a 27% of the respondents say they would use that extra money to acquire more equipment while a 10% said they would divert that finance to support a business acquisition.
This data have been found in a recent research carried out by Purbeck Insurance Services, a UK’s insurance provider. Precisely, Todd Davison, Director at Purbeck Insurance Services said about the findings: “Cash flow is the life blood of any small business. But for a whole variety of reasons, not least the current economic uncertainty, an SME business owner may find themselves looking at unpaid customer invoices, bills from suppliers and wage rolls, and wonder where the money is going to come from.”
“Small businesses are owed billions in late payment and with major brands such as Jamie’s Italian going to the wall, whole supply chains are affected and end up borrowing to fill the gap while they wait to get paid,” Todd Davison continued. “However, using finance to improve cashflow can be a double-edged sword. While turning to a finance provider will relieve the immediate stress of an uncertain cashflow, we believe it would be prudent for the business to take the time and review its financial situation as a whole. In doing so, the owner may find some changes can reduce the need for, or at least the amount of, additional finance.”
Changes may for instance, involve a restructuring of the finances, reviewing credit terms to suppliers, outsourcing the late payment debt, better managing stock control or looking at other additional sources of income such as renting out office or warehouse space.
As well as improving cashflow, the survey found acquiring new equipment (27% respondents) was high on the list for obtaining additional finance followed by supporting a business acquisition (10%), moving premises (9%), R&D (9%), and increasing headcount (7%).
“While many businesses are using finance to keep their business operating, it is heartening to see around the same number are using it to acquire new equipment, suggesting many businesses are flourishing and are possibly looking to expand,” continues Todd Davison.
And he added: “In a lot of circumstances, the only way for a business to raise additional finance is in the form of a Personal Guarantee backed loan taken out by the owners or directors of the business. If putting personal assets such as the family home or life savings on the line for the business really is the only way to raise the finance, directors need to look at ways they can protect those assets; such as Personal Guarantee insurance.”
Hernaldo Turrillo is a writer and author specialised in innovation, AI, DLT, SMEs, trading, investing and new trends in technology and business. He has been working for ztudium group since 2017. He is the editor of openbusinesscouncil.org, tradersdna.com, hedgethink.com, and writes regularly for intelligenthq.com, socialmediacouncil.eu. Hernaldo was born in Spain and finally settled in London, United Kingdom, after a few years of personal growth. Hernaldo finished his Journalism bachelor degree in the University of Seville, Spain, and began working as reporter in the newspaper, Europa Sur, writing about Politics and Society. He also worked as community manager and marketing advisor in Los Barrios, Spain. Innovation, technology, politics and economy are his main interests, with special focus on new trends and ethical projects. He enjoys finding himself getting lost in words, explaining what he understands from the world and helping others. Besides a journalist he is also a thinker and proactive in digital transformation strategies. Knowledge and ideas have no limits.