Traditional bank lending
still the preferred option

Raising additional capital to cope with a lack of money

Small businesses are looking to raise additional capital to cope with a lack of money, research finds, with traditional bank lending still their preferred option. The most challenging issue for small businesses in the current climate is late payment, according to a survey.
Research conducted by Hilton-Baird Financial Solutions on behalf of the Asset Based Finance Association (ABFA) found that cash control and managing cashflow were identified as the biggest challenge, with over half (55 per cent) highlighting this issue.

The study found that small businesses were currently being squeezed by both customers and suppliers.

Over one in three (37 per cent) said they had been asked for swifter payment terms by suppliers in the past six months while nearly half are also under pressure to extend credit terms to customers.

Almost one in four (24 per cent) firms said they have to wait more than 60 days for payment in some instances.
“While good cash control is central to the success of every business, through good times and bad, small firms are at the sharp end when it comes to experiencing the pain that gave rise to the term ‘credit crunch’,” says Evette Orams, director of Hilton-Baird Financial Solutions.

As a result of the pressure on cashflow, 57 per cent of small businesses have looked into alternative sources of finance although for the majority the preference was to turn to traditional lenders for help rather than other options such as asset-based finance or factoring.

“What’s interesting is that although a relatively small number admitted to utilising asset-based finance, factoring or invoice discounting, of those that did, 25 per cent said they would use asset-based finance again to finance the future growth of their companies,” added Orams.

“They indicated that once they have become familiar with the product and understood how it works, they are sold on the benefits as a viable, effective and cost-efficient alternative to traditional finance streams.”