£300 million will be invested alongside private investors to address long-standing gaps in the SME finance market. This money is the first deployment from the £1 billion of new capital allocated to the business bank in the 2012 Autumn Statement. It will build on the success of the Business Finance Partnership to leverage at least the same amount in private sector investment.
The focus is on promoting greater diversity of debt finance available to SMEs by encouraging the growth of smaller lenders and new entrants in the market. Investments will be made via new and existing lending channels on a commercial basis.
New research by the National Institute of Economic and Social Research (NIESR) highlights that SMEs have been disproportionately affected in their ability to access finance as a result of the contraction in bank lending since 2008.
Business Secretary Vince Cable said: Small and medium sized businesses are still telling me that access to finance is their number one problem, preventing them from investing and growing. That’s why through the business bank we are developing a range of measures to provide businesses with the power to choose the type of finance that suits them.
“Today’s £300 million boost shows we are serious about increasing competition and diversity in the business lending market. Establishing a lasting business bank institution is a long-term project, but getting this money reaching SMEs as soon as possible is the first step.”
Guest post: During tough economic times, people are scrutinising many of their payments that bit more carefully, whether they are currently in debt or not
The fact remains that, whatever your financial situation, the clearer idea you have on what you are spending money on and how much you are paying, the better chance you have of remaining stable.
Costs can often be separated into regular and more one-off style payments and, as there isn’t a great deal you can do about fees such as rent, bills and fuel, it pays to think carefully about impulse buys.
At the time of purchase, you may look to convince yourself that you require the product but often you don’t and, even if you do, it is probably best to do prior research and see if there is a better deal.
Impulse buys can be made in a variety of areas, from clothing and shoes, to electrical items and entertainment buys, but whatever area they may be in, ensure that you aren’t putting yourself at risk.
The best way to do that is to simply take a step back and question whether or not it really is required.
Then, if you decide that you could probably do without, move on and keep your cards in your wallet. You may even choose to use that special item as motivation to rid yourself of money worries.
If indeed you do decide that it is necessary then still, take a step back, and do some research.
Chances are, the initial product you pick out won’t be the cheapest or be the best deal around, potentially costing you even more money.
The amount of money spent each by Brits on impulse over the past five years stands at £6.2 billion according to figures, highlighting just how much of an impact this spending is having.
This works out at £1.2 billion a year across the UK and an average of £129 each.
Alarmingly, more than a fifth of those who told researchers that they are prone to the odd impulse buy said they spent more than £200 doing so.
Furthermore, five per cent said they spent more than £500, which is a major amount of cash, whether you are working through a debt management plan or not.
In terms of the major expenses, clothing and fashion accessories were the main culprits, with a fifth of those who said they bought impulsively admitting to never having used the things they’ve bought.
In terms of domestic purchases, doughnut makers, foot spas, telescopes, electric carving knives and chocolate fountains were all cited as buys that people had made.
The figures were compiled by Populus, on behalf of the new national pension provider NEST, with the latter suggesting that people should look to take heed of the revealed statistics.
NEST’s director of communications and engagement, Graham Vidler, also added that many people then have to go through the trouble of selling on their hastily-bought items when they realise the financial trouble they are in.
“We’ve all bought things that just end up gathering dust at the back of the cupboard,” he said.
“By putting the cash into your pension, you could potentially triple your money over the long term. Then rather than feeling guilty, you’ll be de-cluttering your cupboards and investing in your future peace of mind at the same time.”
However, while selling unwanted gifts may be a clever idea in some circumstances, it’s a much better idea not to get lumbered with such items in the first place.
This is why it’s important to vet what exactly you need to buy and there were plenty of barely-used services that contribute to many households’ expenses columns.
Indeed, more than one in ten were spending money on subscriptions to online film rental or streaming sites that they didn’t use very much, while for a third of people, the same could be said for their gym memberships.
This goes to show that impulse buys may be done on the spur of the moment but they can play a part in your finances for months to come.
With all your purchases it’s essential to take a step back and consider whether, firstly, you need the product, and, secondly, if you are getting the best value for money possible.
In a new survey, conducted by commercial finance broker Touch Financial, almost two thirds (59 per cent) of businesses questioned had applied for additional funding, such as a bank loan or an overdraft, at some time in the past six months. Incredibly, almost the same number (55 per cent) had seen their application declined.
In addition, a third of those refused (31 per cent) were given no reason by their bank as to why their application for finance had been unsuccessful. Furthermore, four in five (80 per cent) of those businesses refused bank funding were not given any information on alternative sources of funding.
Touch Financial commissioned the survey to expose the current absence of adequate funding provision for SMEs, and the impact on business confidence. The results have confirmed that an overwhelming majority of small businesses do not feel supported by the UK banks, while almost all agree that the Government could and should be doing more to help.
Perhaps unsurprisingly, in answer to the question ‘Do you believe that banks are supporting small businesses?’ more than four in five (81 per cent) of businesses responded ‘No’. Simon Carter, director of Touch Financial, is concerned that the help that the Government has promised has not been forthcoming: “Any business, regardless of size or sector, should be given access to finance, if not through ‘traditional’ bank lending, then via a number of alternative funding solutions that are available,” he says.
When asked ‘Is the Government doing enough to support small businesses?’ only two per cent responded ‘Yes’; more than half (56 per cent) of respondents answered ‘No’ and the remaining 46 per cent answered ‘Could do better’. Moreover, when asked about their awareness of a number of Government and bank-led initiatives, more than two in five (42 per cent) had never heard of any of them; the highest awareness was for Start Up Loans, which only a third (33 per cent) of respondents had come across.
“Small businesses simply aren’t getting the information and the support that they need if they are to be the primary engine for growth as the Government has suggested,” said Carter. “SMEs are in danger of being left up the proverbial creek and being told there are no more paddles.”
Cash-strapped British businesses have declared their support for business minister Michael Fallon’s proposals to name and shame the members of the FTSE 350 refusing to sign up to the Prompt Payment Code.
Sixty-nine per cent of business owners and finance directors questioned in Hilton-Baird Collection Services’ annual Late Payment Survey believed Fallon was doing the right thing in threatening to disclose the names of those ignoring repeated requests to join the code.
This support comes after their businesses had to wait an average of 21 days beyond agreed credit terms to be paid by customers during 2012, according to the research conducted by the leading debt collection agency. This represents an increase of four days from 2011 and highlights the escalating problems businesses are facing with regards to getting paid on time.
Thirteen per cent of businesses said they were forced to write off more than five per cent of their turnover over the past 12 months, with 38 per cent classifying over 10 per cent of their debtor books as more than 90 days old.
Managing director of Hilton-Baird Collection Services, Alex Hilton-Baird, commented: “Businesses are firmly behind Michael Fallon’s attempts to encourage the country’s largest firms to improve their payment performance. Whether this will have any effect remains to be seen, however, as it isn’t just large corporates that are culpable. Late payment is occurring right the way through the supply chain.
“These numbers are simply unmanageable for the vast majority of businesses, particularly when you take into consideration the range of other pressures on their cash flows at present. In many cases businesses are having to wait more than 60 days, sometimes more, to be paid after providing goods or services. Given this, it is obvious why the economy is caught in a state of flux.
“It is absolutely essential that businesses of all sizes use the most appropriate credit management strategies in the coming months to safeguard their cash flows against this critical problem.”
Small businesses with well-developed finance teams achieve faster, more sustainable growth for longer and can attract investment to help them develop, says ACCA (the Association of Chartered Certified Accountants).
A new report from ACCA – Accountants for small business – says that the SME finance function plays a critical role at different stages of an SME’s growth in attracting investment and helping them “emerge from the shadows”. ACCA says that SMEs need to make themselves ready and in shape to be able to receive finance and that the burden should not be solely on the lender or investor.
Rosana Mirkovic, ACCA head of SME policy, said: “There is considerable evidence which shows growth is much stronger amongst SMEs with a comprehensive finance function backing them up. The role of the accountant in an SME setting goes well beyond the basics of bookkeeping. Their role is vital at different stages of an SME’s development.
“Credit providers, supply chain partners and other stakeholders need a wealth of information form the finance team of an SME. For some investors the information they require changes after investment to focus on other aspects of the business, such as agreed milestones. Finance professionals are central to providing that insight into the business at all stages.
“Day to day financial management is the key to accessing finance. By the time the owner/manager decides to apply for any kind of funding, their chances of getting it are mostly locked in by the way they’ve run their business to date. Independent research confirms that a well-run finance function staffed with appropriately trained people makes SMEs more creditworthy and investment-ready, and is a cause, not a consequence of growth. Despite that fact, most SMEs don’t take advice before applying for loans; most have no trained staff in charge of their finances; and most don’t produce regular management reports.
“While focus has largely been on who won’t lend to SMEs, small businesses have a part to play in making themselves finance-ready.”