By Daniel Hunter
Nine in ten small to medium sized enterprise (SME) owners in the UK believe the Government’s recent initiatives have not been of any help to their business, according to latest research by the accountancy firm Shelley Stock Hutter LLP.
The initiatives include the Seed Enterprise Investment Scheme and the National Insurance Holiday launched by the Coalition Government. In addition business owners were questioned about the Enterprise Finance Guarantee Scheme which was introduced by the Labour Government in 2009 and extended by the Coalition Government.
Meanwhile, just one in ten small business owners believe the Government plans to launch a state backed bank in 2014 will directly help their business, with six in ten adamant it will not and a further three in ten undecided.
At the core of the issue is a lack of understanding from businesses, with nearly two thirds (61%) of respondents admitting they do not understand the benefits of recent initiatives. Under a quarter of small business owners (24%) understood the benefits of Enterprise Finance Guarantee Scheme whilst just over a tenth have any knowledge on the National Insurance Holiday scheme.
“I’m not surprised that there is little or no understanding about the recent initiatives introduced by the Government," Bobby Lane, a partner at Shelley Stock Hutter LLP said.
"There have been a number of initiatives introduced for small businesses, but little supporting information or an education campaign to follow this up. As a result many small businesses are at sea as to how their business will gain and what steps have to be taken to benefit from the schemes.
“The Enterprise Finance Guarantee Scheme has been a great help to some businesses, yet the scheme has received a lot of negative publicity over the past two years. If businesses were made aware of how to access the funding and go about it in the right way, then there would be more successful applications.
“Ultimately for many businesses this could mean the difference between survival and growth. The answer is not to saturate the SME marketplace with more initiatives but to make a concerted effort to provide more detailed information on existing schemes, the best way to access them along with the most appropriate way to finance their business.”
The research also revealed that nearly a third of SMEs (31%) will expect to fund their working capital in 2013 through more traditional routes such as a bank loan or via a bank overdraft. However despite the increasing difficulty of obtaining this form of finance, only one in ten expect to look to invoice discounting or factoring — which may be more appropriate. The same percentage will be looking to a private equity firm or investment from a business angel. In contrast four in ten businesses do not envisage needing any extra funds for the foreseeable future.
“Over the past year or so, there has been a clear shift from banks offering overdrafts and business loans," Lane adds.
"Many say that the days of the business overdraft are now over as banks are favouring asset based lending such as invoice discounting or factoring. However the mind-set of some SMEs is still set in the lending of yesteryear. Many small business owners will need to get up to speed on the alternative forms of finance around.
“The Government must work alongside the Banks to ensure people are aware of all their options to fund the business. It could go some way to change the perception that banks are not supporting small businesses.”
Other highlights of the research include:
- A quarter of small business owners would like the rate of corporate tax cut in 2013
- More than a quarter (29%) want the Government to reduce the national insurance burden on employers, whilst a fifth (21%) want the Government to provide more motivation for the banks to lend
- More than a quarter (27.5%) of small businesses admitted that the survival of their business in 2013 is keeping them up at night
- More than a quarter (29%) are kept awake at night by late payment of customers, whilst a third are feeling secure about their business
- Seven in ten business owners DO NOT have a business plan which extends past the beginning of 2014
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