Credit approvals for SMEs hits 30-month low

SMEs are finding it increasingly difficult to access new finance, according to new research.

The study*, conducted by the Federation of Small Businesses (FSB), shows that just 60 per cent of SMEs that apply for credit are successful. This figure is at its lowest since the fourth quarter of 2015, and significantly down on the second quarter of 2017 (72 per cent).

40 per cent of respondents described the availability of new credit as ‘poor’ in the second quarter of 2018, the highest recorded for two years.

Commenting on the findings, FSB National Chairman, Mike Cherry, says: “While most are preparing for a rate increase this year, credit affordability did drop off following November’s move. Higher rates are one more cost to worry about.

“There is also the indirect impact to consider. Small shops are already under significant pressure. If mortgage costs increase, that means yet another squeeze on consumer spend and yet another obstacle to getting customers through the door.

“Equally, personal and professional finances are closely intertwined for a lot of small business owners. More expensive personal debt can often mean less to invest professionally.

“Yes, rates will rise at some stage. But it needs to be at a pace that small firms can afford.”

As every entrepreneur will tell you, cashflow is the lifeblood of any business. The challenge for all businesses is how to keep the cash flowing. These days lack of cashflow is one of the biggest reasons many businesses fail and SMEs must take more responsibility for their own profitability. 

Businesses should therefore consider alternative funding mechanisms, as our SME Adviser Series explains.

The key, however, for all businesses seeking funding is to choose an adviser who understands the finance market and which banks/lenders offer what products.  At usually no cost to them, businesses can work with an independent adviser who will tap into the wide-reaching network of financial providers, both in the equity and debt markets, and find the right funding solutions appropriate to their individual needs. They will also check the small print to help to avoid any tricky issues further down the line!
Our partner business, BM Structured Finance, specialises in sourcing and restructuring debt finance for SME businesses, enhancing cash flow liquidity and enabling maximum growth. We understand that choosing a finance partner is not a ‘one size fits all’ exercise. We match the most suitable products to each individual circumstance and we work together to ensure compatibility and satisfaction, adding value to your business or client relationship.
Contact Simon Belton at BM Structured Finance or your usual Beavis Morgan Partner for further information about how we can assist you and your business.

* FSB surveyed 1,017 small businesses between 13 April and 27 April 2018.