SME Funding – Is It Really That Difficult To Raise?

According to recent findings by the British Chambers of Commerce, nearly half (49%) of SMEs surveyed find it increasingly difficult to secure funding, with cash flow being the primary reason for seeking finance. But why?

As a lender we have never faced stronger competitive headwinds, not only from traditional invoice finance lenders, but non-bank loan providers, tech-based hybrid working capital providers and the like. From a lender’s perspective it seems to us that business owners have never had more choice, when it comes to funding.

What’s going on?

We talk about funding SMEs, but the term covers a very broad church. The Government currently defines Small and Medium Enterprises (SMEs) as follows:

According to official statistics from gov.uk:

• There were almost 5.6 million businesses in the UK at the start of 2021, 5.5 million of which were classified as Small or Micro – 99.2%.
• 2 million of these businesses did not employ anyone, aside from the owners.
• SMEs employed 61% of the private sector workforce, some 16.3 million employees;
• They also earned 52% of UK plc, equivalent to £2,300 billion.

Although these statistics are somewhat dated now, I can’t believe the optics will have changed significantly over the last 3 years.

We know that many SMEs are facing economic challenges, making it essential for them to have access to reliable financial support. While confidence in the business community is cautiously growing generally, there are still high levels of business failures, and the evidence suggests that HMRC are taking a less lenient approach to arrears and Time To Pay arrangements.

When we meet under-pressure business owners who say to us that they didn’t realise Invoice Finance existed as a product, we still scratch our heads.

There are so many funding options available to business owners at any stage in the business lifecycle, as a quick scroll through LinkedIn will demonstrate. Invoice Finance is (obviously) a fantastic solution for funding working capital. There are also some great non-bank lenders out there, including a nationwide network of Regional Community Development Finance Institutions, providing loans to businesses where the main banks can’t assist.

In the West Midlands alone we are lucky enough to have ART and BCRS Business Loans, in addition to other non-bank regional lenders such as Frontier Development Capital and UKSE. On the business start-up front, Biz Britain are a national delivery partner of the Start Up Loans Scheme. These are the unsung heroes of the SME funding landscape and as a working capital funder, we work alongside them to deliver packaged funding solutions when the main banks cannot assist.

Of course, the fundamentals need to be there for any lender to assist a business: responsible directors, a viable business and a solid financial plan. This is sometimes where business owners let themselves down, through inadequate preparation and organisation, but in most cases, this can be overcome, with a good advisor by their side to guide them through the application process.

Access to finance is vital for the growth and sustainability of SMEs. The challenges highlighted by the research underscores the importance of reliable financial partners.

All we can do as lenders and advisors to business owners, is to keep banging the drum that support and funding is out there. The bottom line is that there are lots of great lenders about, who are only too willing to engage with business owners and their advisors, to find solutions.

Click here for more information about how FlexABL can support owner managed businesses, with a working capital borrowing requirement of up to £500k.