The contextSMEs may be small, but they offer significant contributions to the UK economy, some £200 billion, according to our friends at Liberis. But as many small business owners know, whilst they are lauded by business society as a cornerstone of the UK economy, they continue to struggle to access funding. Over half of UK SMEs are unable to access vital funding, with a reported 30% of them requiring funding just to stay in existence, which leads them down the road to alternative finance providers. But before they run to these resources with cap in hand, SME owners should look to their most crucial funding requirements for their business before the juice runs out. To make a start, they should look at the most common funding requirements for UK SMEs below.
What are the main cost heavy concerns for SMEs?What the statistics show is that there are many urgent funding requirements that SMEs commonly need in order to continue operating, such as paying taxes and bills, including insurance payments, and even just to stay out of the red.
- New equipment – 39%
- Marketing – 34%
- Product development – 32%
- Keeping up to date – 30%
- Keeping afloat – 26%
- Paying tax/bills – 23%
- Insurance – 19%
- Employee benefits – 17%
- Relocation / new buildings – 15%
- Domestic expansion – 15%
ReputationWith these statistics in mind, we can’t blame ‘traditional’ finance providers such as banks being a little hesitant when it comes to the idea of offering SMEs funding. As so many of them evidently do not make reservations for the most basic operational costs. But these facts shouldn’t make SME owners stick their hands in the sand and wait for a solution to fall out of the sky. Instead, what is needed before they even consider alternative finance, is making sure there is full communication between all arms of the business internally.
Solution: Reserve seeking funding for the bigger thingsBy holding team meetings and agreeing upon what cost-saving elements can be employed, and what services they can temporarily cut, SMEs can make provisions that mean the business can operate at a basic functional level. This means they should only go and seek finance to grow, or to add another service to the business, instead of seeking finance in a haze of panic just to make sure the business can stay afloat for the short term. SMEs must save their funding search tokens for when it’s most important, such as growing their business to the next level. When it comes to seeking finance, small business owners, if they can help it, should be looking for long-term funding vaccinations, not quick-fix cash injections.
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