Access to Finance Is Vital for Region's Businesses; with Recent Industry Reports Revealing Fewer Small and Medium-Sized Business Are Accessing Funding from Banks, Sharon Wiltshire, Managing Director in the Midlands at Leading Independent Invoice Finance Specialist Bibby Financial Services, Discusses How Businesses in the Region Are Turning to the Invoice Finance Industry for More Viable Sources of Finance
Byline: Sharon Wiltshire
According to our latest research there is a growing trend among businesses in the West Midlands to steer clear of bank funding in the current economic climate. In fact, only eight per cent of the region's firms have applied for a bank loan in the previous 12 months according to our UK-wide survey of small and medium-sized businesses.
Furthermore, more than half (53 per cent) of businesses in the region have not applied for any external funding in the past year.
These findings are supported by the Bank of England's June report, which suggests businesses are reluctant to approach banks in case it leads to an increase in the cost of existing borrowing or a reduction in overdraft limits.
Of those businesses that are applying for external funding from the banks, a July report by the Federation of Small Businesses (FSB) claims banks are failing to deliver the cash they need, having refused to lend to more than 300,000 small and medium-sized firms in the last 12 months.
With continued cuts in public sector spending, rising VAT, inflation and fuel costs all hitting UK businesses hard, this has the potential to hinder economic growth in the West Midlands. So whether it's a case of firms being wary of approaching banks for funding, or the banks not making cash available, it's vital the region's business community has access to finance if we are to see the private sector boost the economy through a business-led recovery.
While the lack of companies accessing bank funding is not good for the economy, it is also not good news for the Government, who are pushing for banks to lend more money to businesses under initiatives such as Project Merlin; an agreement between the Government and the UK's four biggest banks to make pounds 190 billion of credit available to businesses in 2011, up from the pounds 179 billion they lent in 2010.
Of this lending commitment, Project Merlin promises to make pounds 76 billion available to smaller businesses. However, it emerged in May that the banks missed their first target by more than pounds 2.2 billion. So while I support the Government's intentions behind such initiatives, it remains to be seen whether this will be successful in tackling the ongoing problem of limited access to finance.
While there has been a drop in businesses getting cash from the banks, latest industry reports show increasing numbers of firms turning to asset-based lenders; accessing alternative sources of funding such as invoice finance. …