Is a lack of cash flow still holding SMEs back?

New figures from a finance industry survey reveals that restricted cash flow and lack of bank support are the top challenges facing SMEs today – but that the majority of advisers would recommend alternative finance to unlock the path to growth.

The survey of 300 advisory professionals in the UK by alternative finance providers ThinCats showed that the single biggest challenge facing small and medium-sized businesses in 2018 is restricted cash flow.

57% of respondents say the companies they’re working with are being held back by a block on cash flow.

Looking a little deeper at the responses, it is not hard to see why. The lack of support from the traditional banking sector has emerged as a strong underlying cause. 49% of advisers believe that banks are removing or restricting facilities, which continues to be a major problem, polling above market uncertainty at 46%.

In addition, 41% of participants in the survey indicated that banks just aren’t lending to SMEs.

The survey also suggests that alternative finance is increasingly becoming a main source of funding.

Some 89% of respondents said they would recommend alternative finance for funding growth, while 86% said they saw it as an ideal option for refinancing and restructuring.

Just behind these top two came mergers and acquisitions (84%), management buy-outs and buy-ins (81) and the provision of working capital (68%).

Late payment has long been a scourge for SMEs but the research reveals that only 19% of respondents think it is still a key factor stymying SME growth.

“For years now, SME owners have complained that they can’t access their bank manager – and this naturally puts a block on access to finance,” Damon Walford, chief development officer at ThinCats, said.

“It’s now alternative finance providers are heralding the return of a genuine, personal relationship with local business experts, who invest their knowledge and time in their clients’ business growth (a role that the banks have long since eschewed) to put their considerable expertise to good use – supporting SMEs.”

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