The never-ending churn of Brexit updates mean the only certainty right now is a constant state of change. Whilst all these moving parts cause concern for SMEs, they don’t have to stand in the way of progress – or growth. Encouragingly, almost seven in ten (69%) SMEs are expecting to increase their revenues this year. The question is how are they going to turn this optimism into reality in such a volatile environment? Research by Independent Growth Finance (IGF) indicates access to quick and flexible funding is going to be vital.
SMEs looking to the future despite Brexit concerns
No one knows what the next few weeks, months or even years are going to look like yet, despite all the doom and gloom, many SMEs have decided they are not going to hang around to find out. Instead they are taking control and seeking out funding options. Funding for investment in key areas that will enable them to rapidly respond to opportunities – and challenges – in an uncertain environment. From technology (37%) and staff retention (30%) to marketing (27%) and acquisitions (25%) SMEs are looking to the future.
Slow funding is fast becoming a deal breaker
However, during times of economic uncertainty funding can be tough and slow to come by, with traditional financial providers becoming ever more cautious. In 2018, SMEs waited over two months for funding decisions, suggesting that many traditional funders aren’t providing the responsiveness needed by nimble small and medium-sized businesses.
This poses a real threat to UK SMEs.
Alternative finance on the rise
While traditional banking remains the top source of funding for most organisations (69%) it requires businesses to meet strict criteria. Businessesare increasingly required to fit into one of the specific funding products availableand we all know a square peg won’t fit in a round hole. Alternative finance offers the opposite. It has the flexibility to look at the bigger picture and decide how funding can fit your needs.
Why consider Asset Based Lending (ABL)?
Over one in five (22%) SMEs are already using asset based lending. This type of funding is a more secure form of finance due to the collateral it is based upon. It enables funders like IGF to see the glass half full and make more flexible funding decisions. Even in a period of economic downturn it is a viable option for many businesses; it suits current business needs whilst offering the flexibility to grow along with the business.
During times of change, speed is of the essence. Especially when the inability to forecast is putting a strain on a quarter of SMEs (26%). Specialist ABL lenders can move quickly, assess what a businesses’ funding options are and provide a clear timeline to ensure the facility is in place to meet requirements. Allowing them to focus on what they do best; growing their business and focusing on opportunities that come their way.
What makes a good funding partner?
Three key things to consider when selecting an alternative lender:
- Size – be clear on how much funding you require to overcome your temporary cash flow issues or meet your growth aspirations. A good funding partner will maximise the liquidity within your assets, providing you with the strongest funding option possible
- Speed – at IGF we believe it is essential to get deals in front of the decision makers within 48 hours. We can’t say yes to everything, but, if we can’t say yes, we will say no quickly
- Flexibility – lenders should take the time to understand your business and its needs. This will help shape the terms around the facility ensuring it’s right for you
For further insights into the concerns, growth and aspirations of UK SMEs in 2019, download the Powering Freedom Report.
Jon Hughes is commercial director at Independent Growth Finance (IGF)