News

July 13, 2012

SMEs threaten to vote with their feet if banks don’t deliver

New research from the Forum of Private Business (FPB) shows that many cash-starved small firms are still looking to the banks to provide growth capital and restore confidence.

A resounding 94% of firms on the Forum’s cashflow and finance panel see improved access to finance as “important” or “very important” to restoring business confidence. However, 40% report that their cash position has not improved over recent months.

Alex Jackman, the Forum’s senior policy adviser said: “Many entrepreneurs alienated by mainstream lenders are more than willing to vote with their feet and explore newer, more innovative financial services less dependent on automated risk criteria. There is an important role to be played by accountants and other financial advisers — including bank representatives — in guiding them in the direction of funding solutions that work for their businesses.”

He added: “Small business owners are likely to feel vindicated that the banks are being taken to task given the experiences they have had in recent years — but clearly mainstream lenders remain centrally important in their eyes. Entrepreneurs believe banks can do a lot better and are calling for improved levels of service, including more branches, faster and more transparent decision-making and greater choice.”

The report reveals the following findings:

• While cashflow has improved for 26% of respondents it has deteriorated for 43%.
• Working capital has declined for 41% and improved for 23% and growth capital has deteriorated for 55% and improved for 18%.
• 54% of firms surveyed cite rising costs as one of their biggest financial headaches; meanwhile 33% say late payment is their main financial problem, an increase of 8% from September 2011.
• 20% of business owners report a lack of choice when seeking finance, up by 16% from September 2011, and 17% are experiencing difficulties in accessing funding at all — an increase of 11%.

Panellists were asked what they would require from financial providers in the future. In all, 40% called for more transparent decision-making, 38% for more of a focus on investment in local communities and businesses, 36% demanded faster decision-making and 34% called for specialist national development banks to deal with issues such as export and catering for high growth firms.

In addition, 17% of owner-managers called for more distinctive lenders operating in the small business finance market. However, opinion is divided as to the viability and longevity of “alternative” finance, with 24% of panellists deeming it to be a temporary phenomenon compared to 27% who think it is not.