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  • Writer's pictureExcel-A-Rate Business Services Ltd

Why Are SMEs Struggling to Raise Finance?

Asset finance is a growth area when it comes to SMEs raising money, and in the current, uncertain economic conditions, it could play a key role as we emerge out of recession.

No one would argue that SMEs haven’t had a difficult time, but while there is supposedly support for them out there, many are still falling through the cracks when it comes to raising finance.

Under the Bounce Back Loan Scheme (BBLS), SMEs should be able to apply to banks to access finance quickly during the Covid-19 pandemic.

But some news reports indicate that not all SMEs are able to do this, if they do not currently bank with one of the accredited lenders on the Government’s scheme. And there are reports that some banks that are on the accredited lenders list are not accepting new customers.

For businesses unable to access the BBLS, are there alternatives?

It’s Not Just About Survival

According to the SME Finance Monitor, SMEs have an appetite to access funding from a range of sources.

But 87% of them have reported that the effects of Covid-19 have had a negative impact on them. The biggest aspect of this has been a 50% reduction in sales.

And SMEs are anticipating a lower turnover to continue for the forthcoming months.

Therefore, to improve their profit margins, there is an increased focus on innovation. But innovation requires investment. Which brings us back to the main issue: how to raise finance.

The use of external finance by SMEs fell to 30% in the second quarter of 2020. This is the lowest level the Finance Monitor has ever recorded. Again, according to this research, while there is a general caution among SMEs about accessing finance, when looking ahead.

But, with the vaccination programme well under way and anticipation of lockdown ending sometime after spring, the question for many SMEs will be how they prepare for re-emergence and engaging with an economy coming out of recession.

For business confidence to gain momentum, SMEs will need to find ways of raising finance.

The Benefits of Asset Finance for SMEs

Asset finance can help in times of uncertainty. Where an enterprise wants to grow, but remains wary of achieving success, asset finance provides crucial flexibility.

It allows SMEs to manage their cashflow but still access working capital for investment purposes.

The key is not to spend borrowed money on existing debts, but to use it to invest, to either increase revenue or decrease costs. SMEs can finance or re-finance assets to steady their cashflow, and invest in long-term revenue streams, or improvements that will enable them to benefit from them.

Hitting the Upward Curve

Whereas it might be tempting to see asset finance as a means simply of staying afloat, it’s benefits come from using it strategically, and preparing a business to hit the upward curve as we come out of both the pandemic and recession.

Rather than focus on survival, SMEs need to concentrate their efforts on boosting growth and readying themselves.

What might this look like?

There are broad, strategic aspects for growth that SMEs can invest in, such as:

· Research and development (R&D)

· Digitalisation

· New routes to market

· New technologies

· Sustainable assets, such as electric vehicles.

Ultimately, while the struggle to raise finance through mainstream means can feel all-encompassing, by looking at alternatives, SMEs can help to free up both their finance and their thinking.

Alternative Solutions from Excel-A-Rate

We offer flexible ways for your business to access the finance it needs to plan for future growth. Asset finance enables you to invest money in the areas your enterprise most needs strategic support with. And it needn’t be a drain on your working capital, or effect your existing lines of credit.

For more information, or to talk to a member of our team, call us on 0161 724 2424, email or complete our contact form, and we’ll be in touch as soon as possible.

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