A DROP in funds made available to SMEs is being seen as a wake-up call for small business to explore its borrowing options.
Commenting on 2014’s fourth quarter drop in lending to SMEs via the Funding for Lending Scheme, Iain Moffatt, Head of Enterprise for KPMG in the UK, said: “It’s disappointing to see a £0.8Bn drop in debt finance directed to SMEs through the Funding for Lending Scheme, albeit the rate of contraction has slowed compared to the same period in 2013, which is something of a silver lining.
“While positive GDP growth of 0.5% suggests there is at least reason for cautious optimism on the growth prospects for SMEs, this is not yet enough to prompt businesses to race into investment decisions and call on the associated debt finance.
“However, while we want to see SMEs be able to secure finance to fund growth when they are ready to commit to expansion plans, it should be recognised that this won’t – and indeed can’t – all come from the banks.
This can prove to be a major business project, for which busy entrepreneurs are often unprepared
“Regardless of whether this is due to a lack of appetite from SMEs for bank debt or a mismatch between the risk profile of lending applicants versus the risk appetite of the lenders, it is important that ambitious SME owners consider where their growth finance will come from, and then prepare for in-depth conversations with lenders or investors.
“This can prove to be a major business project, for which busy entrepreneurs are often unprepared. Indeed, a recent study from BMG research shows 37% of businesses give up their search for finance and cancel their spending plans after their first rejection. SME owners should approach conversations with funders armed with robust financial records and forecasts, to ensure they present their investment case in the best possible light.”
However, banks representative body the BBA believes most businesses who need the funding are receiving it.
A BBA spokesman said: “This research shows that nearly eight out of 10 businesses have had the green light for finance in the past 18 months and confidence among SMEs is at its highest levels since this survey began in 2011.
“It’s great that businesses are saying they feel positive about their future and few now see securing finance as a barrier to doing business.
“There is, however, still a gap between perception and reality when it comes to being approved for lending. If you’re thinking about applying we would urge you to speak with your bank – you are a lot more likely to get a “yes” than you might think.”
