2014: The year for the small business?

The latest research from Bank of Cyprus UK has found that confidence amongst small businesses and their prospects for growth has reached its highest level since the Bank’s “Owner Managed Business” (OMB) Barometer was launched in early 2013.

New Year, new contracts won

Of all the OMBs questioned by Bank of Cyprus UK, nearly half expect their sales and revenue to increase over the next 12 months, which is up significantly from the last quarter. Two out of five OMBs said they have won new contracts in the last six months and over a tenth have expanded their business into new sectors in the UK. This increase in optimism amongst small business owners is clearly welcome news, although for some this will have been dented by the recent extreme weather conditions which undoubtedly will have a (hopefully) short-term impact on some businesses.

Funding available

There has also been an encouraging increase in lending to small businesses over the past quarter. Latest Bank of England figures show that lending was 27 per cent higher than in the same quarter last year. In turn, the OMB Barometer report found that 41 per cent of business owners are confident that their bank would approve a request for additional funding. This was up significantly from the last report, where only 24 per cent were confident that their bank would agree to such a request.

Interestingly, for those businesses who have accessed external financing over the past few months, 68 per cent found the process relatively easy, a further positive sign for all small businesses looking to invest.

Realism and optimism evident in equal measure

Despite this new found optimism amongst small British businesses, this is being balanced with a healthy dose of realism. The OMB Barometer reports that only one in ten businesses are planning to ask for new or increased facilities from their bank over the next three months, revealing a discrepancy between the reported availability of borrowing and demand from businesses themselves. Interestingly, this figure remains unchanged from the last quarter.

More than two fifths of respondents continue to finance their business through existing cash flow. Nearly a quarter said that they use personal savings, with a further 12 per cent using personal credit cards. Businesses were least likely to use asset finance and available Government schemes – both at four per cent.

This indicates that businesses remain cautious about their growth prospects. Given the difficulties OMBs have faced since the recession hit, this is not surprising. It is however encouraging to see small companies winning new business, being able to access additional funding and looking to actively grow. To make this a good year for small business it is vital that banks, the government and all those concerned with supporting small business work in harmony to ensure this upward momentum is maintained into 2014 and beyond.

Written by Tony Leahy of Bank of Cyprus UK.

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