25/07/2012

By Andrew Dixon, Executive Director At Bibby Financial Services

Too many small and medium-sized (SME) businesses are unable to access funding and are relying on unsustainable forms of finance such as loans from families and friends, according to our latest research.

Conducted by One Poll, it shows fewer and fewer small and medium-sized businesses are now applying for external funding — just 31 per cent applied in the past 12 months — which has encouraged us to launch Flexidraft, a new flexible funding facility for businesses with a turnover of up to £1million.

The survey of 1000 business managers and directors reveals that 29 per cent were unsuccessful in their funding applications or were put off applying because they thought they would be rejected. A further 14 per cent reported receiving less than they needed to fulfil their business plans.

As a result, businesses are becoming increasing reliant on loans from family and friends. One in five small businesses surveyed said they turned to their nearest and dearest rather than looking at alternative business funding sources.

Recognising the need for a more sustainable stream of finance, our new Flexidraft product will provide businesses with a product that mirrors their specific needs and provides a viable alternative to the bank overdraft.

Validating the need for such a facility, recent figures released by the Bank of England reveal that lending by banks and building societies in the three months to April fell by approximately £1bn (http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9220821/Bank-of-England-data-show-slump-in-small-business-loans-continues.html), while the Organisation for Economic Co-operation and Development recently announced it is so concerned about the lack of access to credit for SMEs that it is to produce an annual report on the issue (http://www.independent.co.uk/news/business/sharewatch/small-talk-smes-could-pay-the-price-if-banking-reform-hits-lending-7669064.html).

Access to finance represents one of the most significant challenges for business owners and managers, with the disproportionate extent to which they have been hit by the downturn severely restricting their ability to survive and grow.

The prevailing sense of nervousness among the UK’s SMEs when it comes to business funding is borne out by the Bank of England’s recent announcement that the total net lending from the five main UK banks under Project Merlin fell in every quarter of 2011.

Operating as trusted choice for companies of all sizes and sectors for almost three decades, Bibby Financial Services remains committed to finding new and innovative ways to championing the cause of SMEs in the UK.

Being independent of the banks allows us to deliver flexible funding facilities quickly and efficiently, which in the current economic climate, could make all the difference for a company and its ambitions for survival in the short-term but looking to long-term growth.

Alternative cash flow funding solutions, such as Flexidraft provide businesses with an immediate and ongoing source of funding against the value of the company sales ledger.