By Daniel Hunter

Over half of small to medium sized enterprises (SMEs) (55 per cent) have a poor performance record resulting from recession trading and almost two thirds (65 per cent) report being penalised by traditional finance providers as a result.

“Many good businesses suffered tough trading during the recession, but when this starts to affect access to finance it is a big problem," ABN AMRO Commercial Finance Managing Director Peter Ewen, commented.

“Most traditional lenders are still assessing businesses based wholly on their past performance, but this approach is increasingly irrelevant today.”

Because of the difficult environment, more than four fifths (83 per cent) of businesses say they have experienced poor cash flow in the last 12 months, whilst three quarters (76 per cent) have seen their turnover fall in the same period.

As a result nearly two thirds (63 per cent) say that their balance sheet looks weak. Over half (57 per cent) of businesses have also paid suppliers late in the last 12 months.

Despite damage caused by the difficult economic environment, nearly a third (30 per cent) of business owners say that their company’s poor trading during the recession does not reflect its potential today.

Two fifths (41 per cent) of respondents say that a backwards-looking assessment of their financial position fails to acknowledge their current activity and underestimates the future potential of their business. In fact, the majority of SMEs (83 per cent) expect their performance to improve next year.

But this optimism may be short lived if businesses fail to access the finance needed to support growth.

Nearly half (44 per cent) of SMEs are worried that their poor trading record will prohibit them from accessing finance.

Two thirds (66 per cent) of SMEs report that they have been discouraged from seeking an overdraft as a result of their poor trading during the downturn and 30 per cent from seeking any form of finance at all.

In spite of this active discouragement, eight out of ten (83 per cent) of the businesses questioned have applied for an overdraft anyway, though more than half (55 per cent) had their applications turned down. A third (32 per cent) even state that their bank’s attitude has discouraged them from pursuing growth altogether.

Peter Ewen comments: “We can’t miss this opportunity to support businesses just when they need it most. If SMEs aren’t able to grab growth opportunities when they arrive, then the finance industry has failed them.

“We need to take a long hard look at alternative finance available and the way in which businesses are being assessed for that funding. If we restrict businesses for surviving the global economic meltdown, then the future of British business is bleak indeed.”

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