Selling assets and raiding savings - UK SMEs shun traditional business funding

Over half say that they won't be looking for funding over next eighteen months

Research carried out by RSM Tenon has shown that just over one in three UK SMEs will be turning their back on business loans over the next eighteen months in favour of alternative sources of funding.  

The RSM Tenon Business Barometer, a quarterly survey of senior management in small and medium sized enterprises showed that many were prepared to look beyond their bank for finance, and instead were looking at other ways of raising capital such as borrowing against business assets known as Asset Based Lending, seeking Regional Selective Assistance Grants and even selling off business assets to raise cash.

Some 17% of business owners surveyed said they would be raising capital through business loans, with nearly ten per cent looking to acquire funding through invoice finance which allows businesses to draw money against sales invoices before customers have paid. Many others said they were considering raising finance through Asset Based Lending, including borrowing against stock, plant and machinery.

Fifty-five per cent of the SMEs surveyed said they weren’t looking to raise any additional finance over the next eighteen months.

Tom MacLennan, Head of Lender Services at RSM Tenon: ‘Businesses that are doing well at the moment will tend to find themselves often paying down debt rather than investing in their business. Whilst the banks remain keen to lend, the relatively low demand for additional borrowing is no doubt a real challenge for them at a time when they are under considerable political pressure to lend more.

‘On the other hand, we have seen business owners that are experiencing flat trading or perhaps struggling, may be reluctant to ask lenders for additional finance simply because they believe the answer will be no. Whilst this may well be the case with regard to traditional funding routes, there are now a number of well-established alternatives based around lending against the individual assets used by businesses which owners can often access.’  

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