Ultimate Finance Column: SMEs need flexible funding
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AUSTIN Thorp, Managing Director (North) of ultimate finance, examines recent comments that government policy for SMEs does not reflect the fact that there are many different types of businesses within this group, and that more flexibility and bespoke funding solutions are needed.
In a recent article in the Financial Times, the new chair of the Confederation of British Industry’s small business council, Lucy Armstrong, said: “For the first time in my life, there is a recognition that private and family businesses will drive the economic recovery”. Her emphasis on the SMEs that are such a vital part of our economy is welcome, given the media’s tendency to focus on large corporations that grab headlines, but fail to reflect the sorts of businesses that the majority of the working population is involved in. She recommends that the government looks to small businesses for inspiration for the Big Society, as their involvement in local communities is often exemplary. Recent statistics released by the Department for Business Innovation and Skills found that SMEs in the UK accounted for 99.9% of all enterprises, 59.8% of private sector employment and 49.0% of private sector turnover. Ms Armstrong made the very valid point that “The UK has an opportunity now to really educate private businesses to use equity as a tool for growth”. But given the diversity of the businesses under the ‘SME’ umbrella, government policy cannot accommodate them all. Rather than a ‘one-size-fits-all’ approach to funding, I agree that it is vital that SMEs are aware of the variety of options that are available to them; from early stage companies which require funding to get them started, to more established businesses that have capital requirements to grow. While the CBI welcomed the government’s plans to extend the scope of the Export Credits Guarantee Department to provide short-term credit to SMEs that are exporting goods, this may not be a suitable solution for all businesses. Instead, there are options such as trade finance that provide a bespoke solution, allowing business owners and managers to remain in control of their finances, but to call on support as necessary. Trade finance solutions can help with the payment of third party costs such as freight and insurance, as well as assisting with duty and import VAT requirements. Rather than worrying about payments, shipping and logistical paperwork, SMEs should be focused on taking orders, and a trade finance solution enables this. Many of our clients based in Manchester have found that trade, asset and invoice finance (or indeed, a combination of the three), can make the difference between survival and failure, growth or stagnation, and is a valued tool that is underused and relatively unknown. Government policy can and will have an impact on SME funding, through agencies such as the Export Credits Guarantee Department and initiatives such as Project Merlin. However, I agree wholeheartedly with the CBI’s sentiments about the breadth of businesses under the SME title, and given this, the need for flexible and bespoke providers of finance remains strong. Austin heads the team at ultimate finance’s offices in Manchester. With 24 years’ experience in the finance sector, Austin is also a Manchester City season ticket holder, plays off a handicap of 14 at Worsley Golf Club and enjoys watching rugby. More articles in
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