SMEs Fear Failure due to Lack of Funding

SMEs Fear Failure due to Lack of Funding

SMEs Fear Failure due to Lack of FundingOver 55% of UK firms are worried that there will be a shortage of cash for them to borrow this year, with almost a third fearing the lack of lending could put them out of business, according to a survey of 4,000 businesses, conducted by Touch Financial.

This nervousness amongst the small business community follows a very tough trading period from late 2008, while the UK economy was in recession. Almost half of the organisations questioned believed that the downturn in the British economy led to their growth being restricted and a number of them were forced to cut costs, which included 16% of businesses making staff redundancies.

As they go into 2010 the small business community remain very nervous about their prospects of accessing commercial finance and the impact it would have on their business if they’re unable to raise the finance they need to stay afloat. Almost 32% of the firms surveyed are afraid that the scarcity of funding in 2010 could result in the collapse of their business.

Even if they survive another 12 months many of those surveyed believe a lack of funding will hold back business growth. A shortage of working capital means cash flow will be stretched, a factor recognised by the Government’s indefinite extension of the Business Payment Support Scheme that allows VAT and PAYE settlement to be deferred. Lack of capital also prevents the investment that’s essential for growth, as businesses are unable to purchase new equipment, develop their products or explore new markets.

Simon Carter, Director at Touch Financial said:

“Our survey confirms the picture being given by other economic indicators, that the UK is still recovering and 2010 promises to be another tough year.

Although the big banks have all committed to lending more to small businesses it is evident that this is yet to filter its way down to those who need it. We have however seen some of the ‘smaller’ lenders filling the void left by the high street banks. The trouble is unless small businesses speak with an independent broker they are unlikely to be exposed to those lenders who could potentially help.”

To help businesses raise finance Touch have written an article titled 7 ways to raise £100,000 in today’s economy.

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