It’s always an exciting time when Raconteur release their Funding Britain’s Growth report, as it is guaranteed to kick-start some vital conversations surrounding what needs to be done to help support Britain’s smaller businesses. The following are the four main takeaways I took from this year’s report.
1) Smaller businesses are still struggling to access the funds they need to grow
The main point raised by the report is that the UK’s small and medium-sized businesses are still struggling to get access to the funding, which is putting their growth aspirations on hold.
According to the British Bankers’ Association, net lending to businesses dropped by £2.7 billion in December last year. While this data isn’t broken down into company size, similar figures from the Bank of England showed that net lending to SMEs fell by £300 million in the same period.
The Department of Business, Innovation & Skills 2014 Small Business Survey found that 73 per cent of UK SMEs have growth aspirations that they don’t feel able to achieve. Almost half of those said one of the main reasons was difficulties in accessing finance. A separate report from the British Chambers of Commerce confirmed this feeling, finding that access to finance is still seen as a barrier for 60 per cent of businesses looking to grow through exports.
It’s not all bad news though. While businesses struggle to access funding from traditional sources, an ever growing number of alternative finance providers are stepping in to help. At Aldermore, we pride ourselves on helping businesses grow with our flexible finance solutions.
2) Small businesses are increasingly turning to alternative forms of funding
Due to the difficulties experienced when trying to access traditional funding, small and medium-sized businesses are increasingly turning their attentions to alternative finance as a way to fund their growth.
The alternative finance sector is growing at an increasing rate, and is projected to hit £12.3 billion by 2020. Confidence in the sector is growing from all angles too, with clear support from the UK government. The British Business Bank has so far invested over £60 million into alternative finance solutions.
However, despite all of this, there is still a great deal of confusion surrounding business finance, with research from Verus360 finding that 40 per cent of businesses are unsure what they’re paying for their finance. This is a clear call for alternative finance providers to be much more transparent when it comes to their offerings.
At Aldermore, we’re constantly striving to offer the best service possible to all of our customers, and transparency plays a big part in this. We work hard to offer businesses a straightforward approach to invoice finance and asset finance, with clear, easy to understand pricing structures.
3) Some of Britain’s fastest growing companies are using invoice finance to expand and thrive
As alternative finance continues to grow in popularity, we’re starting to see an increasing number of success stories from businesses that have used this to achieve impressive growth.
Smarter, a ‘connected kitchen’ business that was created in 2013, credits invoice finance as one of the keys to their early success. CEO Christian Lane commented on how invoice finance enables his business to remain cash liquid, saying: “We have no funding, so being able to use an invoicing scheme has been a real life-saver.
“It’s helped us invest in software and staff, and funded out production. We wouldn’t be where we are without it.”
4) Alternative finance is opening up opportunities for smaller investors
Finally, the rise of alternative finance solutions, especially peer-to-peer lending and crowdfunding, has opened the doors for more people to invest in businesses, often on a much smaller scale. Individuals now have the opportunity to easily invest in small and medium-sized businesses at pivotal points in their development, with the potential to receive great returns on their initial investment.
As with any financial decision, however, this type of investment is not without its risks. If it is an area you are considering, it is worth doing your research first and even speaking with an independent financial advisor before investing any of your money.
Kathryn Hopkins, one of the authors of the report, says that 2016 is shaping up to be an interesting year and I couldn’t agree more. At Aldermore we’re excited to see what the next 12 months has in store for the UK businesses and we are eager to increase the support we provide to help them along the way.
Read the entire Funding Britain’s Growth report here.
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