Firms put growth plans on hold as overdrafts are cut
ONE in ten businesses in the West Midlands have had their overdraft cut in the last 12 months a new survey has revealed.
Of the local firms that had their overdraft cut, a fifth claimed that the reduction has had a negative impact on operations, while a 20% revealed that the cuts have stifled their plans for growth.
The figures come from the latest Close Brothers Business Barometer, a survey that canvasses the opinion of SME owners from a variety of sectors across the UK on a range of economic and financial issues.
Mike Randall, CEO of Close Brothers Asset Finance, said: “Overdrafts often provide an essential lifeline for SMEs. Many have experienced difficulty in accessing finance from their banks in recent years and are relying on overdrafts alone to fill the cash flow stop-gap.
“While this strategy may be sufficient in the short term, it’s risky as banks may not be able to guarantee consistent funding. The reality is that SMEs may struggle to sustain operations in the short term with even a minimal reduction in the finance they have at their disposal.”
The Business Barometer also revealed that two thirds of businesses polled in the West Midlands would not consider using asset finance as a means of helping their cash flow. One of the main reasons cited was lack of understanding of the products.
Randall said: “Given the situation with overdrafts it is a concern that many businesses are still unaware of all the funding options available to them or don’t feel that they are sufficiently knowledgeable about the range of products on offer.”