Looking after customers and staff are among the secrets of long- term business survival, according to a recently published survey of small and medium-sized enterprises that have been in existence for more than 30 years. Pointing out that most new businesses fail within three years of starting up and that only 100,000 (2.7 per cent) of the 3.7 million businesses that currently exist in the UK are likely to reach their 30th anniversary, the survey by the London- based market research company FDS International says that other important factors include adaptability to changing market needs, hard work and determination.
The only explicitly financial issue mentioned was good control of cash flow. However, it is well known that in tough times like the present, funds can be tight. This is especially true for businesses that are dependent upon loans and overdrafts.
Indeed, experts warn that entrepreneurs and other business owners should not rely too much on such facilities, even if interest rates remain low. Steve Janes, partner with the Home Counties commercial law firm Matthew Arnold & Baldwin, says: "Overdrafts can be called in by banks at very short notice, while loans normally have provisions that if a payment is missed then the whole loan becomes due immediately."
Latest Bank of England figures do not suggest that small firms are having any problems obtaining finance and the continuing buoyant property market means that all loans secured against buildings are likely to be secure. But there is anecdotal evidence that banks managers are becoming more "nervous" about their exposure to smaller businesses and in some cases reviewing loans.
Official figures indicate that traditional term loans and overdrafts are far more widely used than other means of finance, such as factoring and invoice discounting. At the beginning of this year term loans stood at pounds 27.8bn, with overdrafts at pounds 10.8bn. However, the picture appears to be changing. The Factors and Discounters Association's figures for the second quarter of this year show that more than pounds 7.2bn of funding is being provided to UK businesses by its members. In particular, there has been substantial growth in invoice discounting, which has risen 19 per cent since June 2001.
The association says the continued growth in the factoring and invoice discounting sector is now challenging the traditional overdraft as the preferred form of funding for SME growth. The current figure for overdrafts represents a 68 per cent fall over the past decade, it adds. …