• Small Business Loans and Debts

    A recent study by the business software services provider, Sage UK, has found that almost 25% of requests by small businesses for business loans were rejected by the banks last year.

    The study is compiled from around 1,000 responses to a survey which shows that around a quarter of all UK small and medium sized businesses applied for financial assistance.

    Interestingly the study also finds that seven in ten small firms make use of their business plans to measure the performance of their company, but that only one in ten use their business plans to help them apply for business loans.

    And surprisingly, the research also identifies that just under half of all firms do not have a business plan at all, which may help explain why they can not raise finance.

    Robin Moore, product manager for Sage’s small business division says,

    ‘Access to finance remains one of the greatest challenges facing small businesses today. However, there are a number of vital things owners can do to help themselves, such as ensuring they have a fully robust and up-to-date business plan in place.’

    Meanwhile a new government scheme will offer resources to small and medium sized companies to help them get their invoices paid on time.

    The scheme includes a set of announcements offering information, guidance and support to aid businesses struggling with late payment, the most common problem that threatens firms’ cash flow.

    According to a recent survey by credit referencing agency Graydon UK, some 51 per cent of businesses report that late payment has become worse during the past year, with around 20% say that it could threaten their ability to continue trading in 2012.

    A new Graydon survey, conducted in conjunction with the Forum of Private Business (FPB), asks small business owners what cash flow management methods they believe are most effective.

    FPB chief executive Phil Orford says,

    ‘Late payment has long been the scourge of small firms, decimating cash flow, preventing growth and threatening their very survival – but there are steps business owners can take to minimise the problem.


    ‘Often the issue is that they are not aware of how to implement a few practical measures that can make a big difference.’

    These snippets of news re-enforce the importance of having a business plan (in writing) and controlling your cash-flow.

    Are you suffering from late payments? Do you think that the government schemes will help.

  • Majority of owner managed businesses have bad credit rating

    There was a time that the trade relationship between supplier and customer was pretty much a private matter.  Not any more.

    Chances are that if you have a trade account with a supplier they are probably keeping tabs on your credit worthiness, just like your credit card provider does.  30 days credit means exactly that if you want to keep a clean sheet.

    Nearly two-thirds of small businesses have a bad credit score, says credit referencing agency Graydon UK.

    Of three million SMEs reviewed, 62 per cent were deemed to be above normal credit risk in terms of defaulting on trade payments or getting into financial difficulties.

    Martin Williams, managing director of Graydon UK, says the reason the figure is so high is due to a lack of readily available information on SMEs when credit agencies are scoring them.

    ‘Without historical information, it is very difficult to get credit. Small firms need to stop seeing credit scores as weapons used by large corporates against them, and see them instead as tools to help them gain credit and finance,’ he adds.

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  • The Cost of Borrowing is too high

    Smallbusiness.co.uk is reporting that many small business owners are fed up with having to pay the banks high rates on their business borrowing.

    Businesses believe that bank-lending terms are exorbitant, according to research from finance provider Syscap.

    Some 90 per cent believe that loan arrangement fees are excessive, while 75 per cent feel that the lending margins on loans are too high.

    Philip White, chief executive of Syscap, says: ‘Businesses appreciate that risk needs to be priced into loans but feel that the cost of borrowing now far exceeds the risks.

    ‘While banks argue that the low level of lending is because there is less demand for funds, businesses are saying that the high cost of loans is what has depressed demand. Good businesses shouldn’t be punished for the past lending mistakes of the banks but that is what is happening.’

    Just 3 per cent of businesses believe that their ability to access bank lending has improved over the past year, while 38 per cent feel that it is now more difficult to secure bank funding than it was 12 months ago.

    Of the 80 respondents questioned, over a third (36 per cent) say they are delaying investment in their business because they are unable to secure funding. â¨

    Research from the British Chambers of Commerce found that access to finance has deteriorated in the last three months, with 33 per cent of companies reporting that funding availability has become more difficult, compared with 20 per cent in June.

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    Should not really come as a surprise, but it does go against the grain of what the government is telling us through the media.  What do you think?

  • 217,000 hidden credit cards masking debt struggles

    Wow, just in time for Christmas the Halifax try sew a little doubt into people’s minds when they are opening their Christmas presents.  Thanks!

    New research from Halifax has revealed that there are an estimated 217,000 credit cards which are kept secret from spouses.
    The bank has warned that this could carry serious implications for household finances, as well as …
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  • Small Business Boss Says "economy is not going to change for the better"

    Business website smallbusiness.co.uk is quoting three significant names in the UK small business arena as saying that we are not out of the woods just yet.

    Charlie Mullins, founder of Pimlico Plumbers, says he is not optimistic about next year. ‘We’re busy and slightly up on the first quarter, but I feel that the economy is not going to change for the better, and worse is to come.

    ‘The recession has caused so much damage and people remain unsure about reinvesting. Yes, we will get through this. Yes, we need to be confident. But we also have to be true to ourselves and stop pretending we’re not in the depths of a recession,’ says Mullins.

    Digby Jones, former head of the Confederation of British Industry, believes next year will be very difficult for a lot of companies due to a lack of financial support. ‘The situation is not helped by the two banks that we [as a nation] now own not lending – they need to,’ he adds.

    Jonathan Davis, managing director of professional services firm Armstrong Davis, says businesses need to prepare for the worst by focusing on costs. He says: ‘If you can get through the next two to three years, which are likely to be as painful as 2008, there will be fewer companies around and you will be able to take a larger market share.’

    Despite expectations that the economy would emerge from recession last month, figures from the Office for National Statistics showed that GDP shrank by 0.4 per cent – making this the longest recession in over 50 years.

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    What do you think?

    Have you seen signs of a growing economy in your business, or is it a false dawn?

  • Businesses not seeking finance

    So on the one hand we appear to have reports saying that banks are not lending to businesses, and then we hear the banks saying “but nobody wants to borrow”.  Is it any wonder that people get confused.

    The majority of businesses are choosing not to seek extra funding, claims a report from HSBC.

    According to the bank, four in five of businesses say they don’t need money because they are tightening their belts and running off their own resources, with only 15 per cent currently seeking external investment.

    Noel Quinn, HSBC head of commercial banking, says: ‘Overall, we are still experiencing a lack of demand for finance from businesses, despite having made funds available. We believe that now is the time for companies to revisit financial plans and consider using different types of finance for the future.’

    Of the 2,100 small businesses surveyed, 32 per cent said access to finance was likely to be a key challenge in 2010. Some 17 per cent said they weren’t seeking finance due to the banks not lending.

    However, according to the Forum of Private Business, the cost of finance remains a major problem for many SMEs, with three in five reporting that it is too high.

    Original Article by Smallbusiness.co.uk