One third of UK SMEs urgently need financial support to survive economic pressures
A recent survey by Novuna Business Cash Flow, involving 500 SMEs, has uncovered that 33% of small and medium-sized enterprises in the UK urgently need financial support within the next year to sustain their operations. As these businesses face mounting economic pressures, it’s crucial to explore funding options beyond personal borrowing and traditional bank loans.
SMEs turn to personal borrowing and bank loans
The survey revealed a heavy dependence on personal finances, with 19% of SMEs dipping into their savings, borrowing from friends and family, or re-mortgaging properties. Secured bank loans, used by 17% of SMEs, remain a common source of business finance. However, there are other cashflow finance options that could potentially stabilise SME operations.
Impact of late payments
Late payments are a significant challenge for SMEs, affecting 45% of respondents. Delayed payments disrupt business cash flow – the net amount of cash being transferred in and out of a business – and are particularly problematic in the UK, where timely payments are vital for maintaining healthy operations.
Despite these challenges, only 2% of SMEs have accessed or applied for cashflow finance solutions like invoice finance and account receivable factoring since November 2023. These options advance money against outstanding invoices, improving cash flow. The low uptake suggests a lack of awareness and understanding of these financial alternatives that could alleviate cash flow issues caused by late payments.
External funding needed more than ever
With 37% of SMEs stating that unfavourable economic conditions make external funding more critical than ever, and 34% admitting they would have to close without this support, the need for comprehensive financial literacy among SMEs is evident. It is imperative to ensure SMEs are fully informed about the various financing options available, enabling them not only to survive but also to thrive in challenging economic times.
John Atkinson, Head of Commercial and Strategy at Novuna Business Cash Flow, emphasises the benefits of exploring diverse financing options, particularly cashflow finance. "Our survey underscores the critical role that access to business finance plays in sustaining companies, and the variety of options used to stay afloat. Business cash flow finance can offer a lifeline to companies struggling to make ends meet due to delayed payments. It's essential that more SMEs become aware of and understand how to leverage such options effectively. At Novuna Business Cash Flow, we are committed to helping businesses flourish by easing the pressures of cash flow challenges associated with late or outstanding invoices."
