Last year Business Debtline spoke to a record number of small business owners and directors. In all, Business Debtline advisers answered nearly 38,000 calls – a highest number in the service’s history – from 26,000 small businesses, of which 6,181 had debts of over £50,000.

Nicola Connop spokesperson for Business Debtline said: “Our team of advisers speak to thousands of struggling small businesses every month. Many of these businesses have been hit by the tough economic climate, with lots of callers pointing to trade shortfalls, late payers and supplier issues as the reason for their difficulties. It is clear to us that the difficulties faced by small businesses extend far beyond the insolvency figures announced today.

“Whilst insolvency can seem like a daunting process, there are occasions where it will be the best option, both financially as an individual, and also with a view to trading again in the future. Business Debtline can help small businesses identify when insolvency might be a sensible move. Where it isn’t the right option, we can help small businesses get back on their feet.”

Business Debtline is open 9am – 5:30pm Monday to Friday. Call 0800 197 6062 for free, independent and confidential advice.

Paul Aitken, CEO of personal asset lender borro commented: “The deadline is fast approaching for people to submit their self-assessment tax return. People who find themselves with a larger than expected tax bill or waiting to claim tax allowances, may need short-term finance – either for themselves or their business.

“Tax related applications to borro have already increased by 39 per cent from 2010 to 2011 and we expect this trend to continue.”

According to the latest monthly CBI Distributive Trades Survey covering the first two weeks in January, 44 per cent of retailers saw sales volumes fall on a year ago, while 22 per cent reported a rise, giving a balance of -22 per cent. This was the lowest since March 2009 (-44 per cent), but was broadly in line with expectations (-18 per cent).

Retailers reported sales were disappointing for the time of year (-20 per cent) and orders were also down (-14 per cent), with firms expecting levels to fall again next month (-23 per cent). Stock levels remained constant, but fairly low, in line with recent months (+10). Retailers expect annual sales volumes to continue to fall in February, albeit it at a slower pace than this month (-10 per cent).

There was a mixed picture across the sub-sectors, but with most reporting a fall in sales volumes on a year ago, including hardware & DIY (-80 per cent), durable household goods (-100 per cent) and non-specialised retailers such as department stores (-34 per cent). Grocers saw a modest increase in sales (+6 per cent), following a much stronger trading period in December (+52 per cent). The non-store category, which includes online and mail-order, performed well (+50 per cent).

Ian McCafferty, CBI chief economic adviser, said:

“Shoppers have reined-in spending across the board at the start of the New Year after taking advantage of early discounting last month, which boosted pre-Christmas sales.

“Family budgets are under continuing pressure with inflation still high and wage increases modest.

“Consumers are still holding off particularly from buying big ticket items like washing machines and fridges. Online and mail order sales were the only areas that performed well in January, but growth was still down on last month.”

Among wholesalers, 59 per cent saw sales volumes rise, while 22 per cent reported a fall, giving a rounded balance of +36 per cent, exceeding expectations of -2 per cent. Sales are expected to increase again next month (+24 per cent).

Motor traders saw sales volumes fall for the 13th consecutive month (-9 per cent), and a similar decline is expected next month (-12 per cent).

The bank will continue to provide support for businesses which trade or aspire to trade internationally and commits to providing lending facilities to support business growth and job creation.

The bank has confirmed that it met its Merlin lending intentions in 2011, which were agreed with the UK Government, exceeding the full year target to provide £38.8 billion of lending facilities to UK business customers and supplying gross new lending facilities of more than £11.7bn to Small and Medium-sized Enterprises (SMEs).

Having met its Merlin intentions in 2011, HSBC plans to lend even more to SMEs in 2012, providing there is suitable demand. In addition, to reinforce the bank’s strategy to be the leading international trade and business bank, HSBC will further support UK businesses by committing to:

• Recruit around 50 additional International Commercial Managers, ensuring customers involved in overseas trade are fully supported. This will bring the total number of International Commercial Managers to 180;
• Support export trade to the tune of £7 billion through our Trade Finance capabilities;
• Look to manage £30 billion of invoices for customers trading within the UK or internationally, providing critical working capital for these customers;
• Look to approve at least 80 per cent of applications for finance from SMEs; and
• Extend the availability of HSBC’s International Business Overdraft, which offers reduced interest rate for each overseas country a small business is trading with, up to a maximum discount of three per cent for the first 12 months.

Jacques-Emmanuel Blanchet, head of commercial banking UK at HSBC, said: “HSBC is committed to supporting UK business. In 2011, the Merlin intentions gave focus to SME lending, and we continued to enhance our support, launching new innovative products and holding hundreds of events across the UK and the world, to encourage UK businesses to share their knowledge and develop long term relationships internationally.

“In 2012 we will further increase our support for SMEs looking to grow and internationalise, across all sectors and all regions. Many of our customers are experiencing growth by trading in new markets and we are very well placed to support this, through our growing team of specialist International commercial managers and HSBC’s enviable global network, to give UK businesses the best chance of success.”

MarketInvoice has now moved into international invoice auctions and trade finance and is opening a liaison office in Hong Kong. MarketInvoice HK Limited will now help foreign SMEs solve their short term finance problems, as international credit conditions for SMEs tighten.

Data from the site has revealed that SMEs that deal in exporting goods and services to the likes of Europe, America, the Middle East and Japan have turned to invoice auctioning, with the site now attracting global buyers from afar afield as Russia, Singapore and Switzerland.

In 2011 several Hong Kong companies approached MarketInvoice to use its service as they export into large UK supermarkets and retailers such as Morrisons, Arcadia, Amazon and Homebase.  One Hong Kong company has now auctioned over £800,000 in invoices to date and is forecast to auction between $4 – $5 million of invoices via MarketInvoice this year alone as UK retailers’ take up to 45 – 90 days to settle payments. Companies in Hong Kong have also found it difficult to obtain bank loans without pledging large collateral and personal guarantees. It was against this backdrop that MarketInvoice saw an opportunity to expand and help SMEs abroad with the working capital needs for their trade links into large UK corporates.

Anil Stocker, co-founder and director of MarketInvoice said: “Our core offering  is still very much for UK SMEs with UK customers, and with the latest official figures indicating we are now entering a new recession, we anticipate that UK SMEs will rely more heavily on invoice auctioning as banks tighten their lending criteria.

“However, we simply couldn’t ignore what our data was telling us. We regularly run auctions in pounds, euros and dollars but we were finding increasingly that foreign companies, particularly several in Hong Kong who export in to large UK retailers were turning to us for help. This shows that the problems that UK SMEs are currently facing are also being faced globally. Our customers are telling us that banks in Hong Kong in particular are asking for huge guarantees to secure loans, which a lot of SMEs just can’t give. It was for these reasons that we saw an opportunity to expand our offering and set up a Hong Kong office. With a very real fear of a global recession we know that international SMEs will have as much a tough year as UK SMEs.”

With late payment rife, order books down and the challenges involved in accessing traditional funding well-documented, only 31 per cent of respondents are expecting their business to expand over the next six months. Meanwhile, a worrying 20 per cent predict it will contract. Yet there was an underlying theme amongst respondents that the national media is largely to blame for the length and depth of the downturn due to its constant negativity.

Further analysis of the data confirmed that confidence is crucial, as one respondent summarised: “It would be helpful if all types of the media stopped spreading negative news. It is so depressing when it is all doom and gloom. If people feel there is hope, everyone can face the future with a more positive outlook. Now there is never any good news – everything is talked down.”

Such negativity can become a self-fulfilling prophecy that has a detrimental impact on businesses and their future investments and outlook. Given that the independent Office for Budget Responsibility has downgraded its economic growth forecast for 2012 to just 0.7 per cent, the chances of grim vision becoming a reality look increasingly likely.

This mindset has therefore resulted in business owners opting to hoard their cash rather than invest in their future, as one respondent reveals: “We should be recruiting more staff, but the economic outlook is so uncertain that we are holding back on all major decisions. If confidence is boosted, I expect strong growth for our company, if not we could be in for a very rough ride and all bets are off.”

The blame does not lie solely with the media however, with others instead highlighting limited access to funding – which is required to overcome businesses’ cash flow challenges – as a reason for the sustained downturn: “There is not enough money circulating,” explained another respondent. “Businesses are relying on bigger and bigger overdrafts where previously none were required. Small businesses cannot carry the financial burden of non-payment of bills while the banks are not prepared to facilitate credit to the level it is required.”

Managing director of Hilton-Baird Financial Solutions, Evette Orams, has urged businesses to take a thorough look at the wider options available to them: “It is clear that UK businesses – and SMEs in particular – are suffering from a distinct lack of confidence currently. This inevitably leads them to at least think twice, if not defer any decisions regarding investment in their business’ growth.”

She continued: “The difficulties firms have faced in accessing traditional sources of bank finance has served to exacerbate issues, but, by exploring other options available, owners can give themselves the best chances of growth and take measures towards safeguarding their long-term stability. Our survey found that 50 per cent of invoice finance users expected their business to expand in the next six months, demonstrating that by securing a more flexible and targeted cash flow solution businesses can set themselves up for growth.”

The new Manufacturing Advisory Service (MAS) is now available to all manufacturing businesses across England. It will be delivered by the MAC, which is comprised of Grant Thornton, Pera, WM Manufacturing Consortium Ltd and SWMAS Ltd. It has been estimated that the new MAS will help to generate £1.5 billion in economic growth, 23,000 jobs and safeguard 50,000 jobs.

Businesses interested in finding out more about the programme can find out more by visiting www.mymas.org.

Business Minister Mark Prisk said: “Manufacturing contributes half of Britain’s exports and has much higher productivity than the rest of the economy so it is essential to our plans for growth. That is why we are taking steps to ensure our industrial base is thriving as part of a strong and balanced UK economy.

“The new Manufacturing Advisory Service will play a key role, providing tailored advice to businesses helping them to grow and thrive, with a specific focus on helping SMEs improve competitiveness and unlock their growth potential.”

Karl Eddy, head of government infrastructure advisory at Grant Thornton and head of MAS, said: ”This type of programme is vital to support Britain’s businesses and economy in growth. MAC is driven by a passion for dynamic, innovative business and has proven experience in delivering advice for growth. As we drive this historically successful programme in to a new era we encourage business leaders, innovators and entrepreneurs in the manufacturing sector to contact a local adviser to find out more about how MAS can deliver real benefits for their business.”

Small manufacturing businesses will also have access to a new initiative recently announced by the Government to improve the global competitiveness of UK advanced manufacturing supply chains. The up to £125 million fund will cover the whole of England and will help to support the UK supply chain, encourage new suppliers to invest in the UK and support economic growth.

For the three months ending November 2011, results showed that just under a third (30 per cent) of firms surveyed increased turnover, 37 per cent experienced static turnover, while a third (33 per cent) experienced a decrease. This gave a net balance of minus three per cent; a very slight deterioration from the zero per cent of the previous quarter and the zero per cent of the same quarter one year ago.

This latest Business Monitor shows a slight deterioration and a slowdown in the rate of recovery. A return to recession is not indicated but expectations for the next six months have dropped.

The overall net balance for turnover for firms in the production sector in the three months to end November this year was plus nine per cent. This is better than the zero per cent of the previous quarter and significantly improved on the minus one per cent of the same quarter one year ago.

Service businesses have not experienced such benign conditions with the overall net balance for turnover for the three months ending November at minus eight per cent – well down on the zero per cent of the previous quarter and the plus two per cent of the same quarter one year ago.

Volumes of repeat business showed a deterioration from the previous quarter with the net balance on volume of repeat business at minus six per cent this quarter compared to minus one per cent in the previous quarter and similar to the minus seven per cent of the same quarter one year ago. The trend in the volume of new business is similar. An overall net balance of minus seven per cent was recorded compared to the minus three per cent of the previous quarter and the minus one per cent of the same quarter one year ago.

Export activity has plunged. In the latest three months the net balance of export activity was  minus 17 per cent – a significant fall from the plus 10 per cent of the previous quarter and a much worse level than the plus two per cent of the same quarter one year ago. Export activity appears to have been severely affected by the global slowdown and the sovereign debt crisis in the Eurozone economies.

Donald MacRae, chief economist, Lloyds TSB Scotland said: “This latest Business Monitor suggests the already muted recovery in the Scottish economy has stalled. Subdued domestic demand coupled with the global slowdown has hit both services and manufacturing sectors. There is no definite sign of a lapse into a “double dip” but every indication of an already slow recovery slowing further to the point where growth is negligible or non-existent. In the face of slowing global demand, falling business and consumer confidence in the UK and cuts in government spending, the Scottish economy is struggling to maintain growth and momentum. A more vigorous recovery awaits an uplift in both consumer and business confidence.”

Tracy Ewen, managing director at IGF, gives her rundown of the Top 10 New Year’s resolutions below.

“A new year is a time for reviewing what’s worked well and what needs to be changed for the year ahead.  With this in mind, here at IGF, we have published our New Year’s resolutions for the UK SME market, with a view to helping businesses succeed in 2012.”

SME New Year’s Resolutions

• Plan, plan, plan! Prepare cashflow projections for next year, next quarter and, if you’re on shaky ground, next week. An accurate cash flow projection can alert you to trouble well before it strikes;
• The key to managing cash shortfalls is to become aware of the problem as early and as accurately as possible. Financial services providers are wary of borrowers who have to have money today. They’d much prefer lending to you before you need it, preferably months before;
• Cashflow problems can often be self-inflicted. Companies which send out incorrect invoices often find that their customers end up returning an invoice and requesting a new one. Make sure all your invoices are correct before they’re sent out to ensure your customers have no excuse for not paying;
• Make sure you have a robust process for chasing up your invoices;
• Balancing credit terms vs cashflow needs is something many businesses struggle with. Be sure to tell your potential customers upfront about your credit terms – before you provide your product or service;
• Know your customers! Some of your customers will pay on time every time – others will be perennial late payers. The more information you have about the customer, the easier your payment collection process will be;
• Don’t always associate higher sales with better cashflow. If large portions of your sales are made on credit, when sales increase, your accounts receivable increase, not your cash. Meanwhile, inventory is depleted and must be replaced. Because receivables usually will not be collected until 30 days after sales, a substantial increase in sales can quickly deplete your cash reserves;
• Consider using an invoice finance provider. These are financial services businesses that can pay you today for invoices you may not otherwise be able to collect on for weeks or months;
• You may be able to raise cash by selling and leasing back assets such as machinery, equipment, computers, phone systems and even office furniture. However, you could lose your assets if you miss lease payments;
• If your cash flow has become stable and predictable, you can consider investing your excess cash. You can earn additional interest income, as well as have the necessary cash to dip into during tough times.

The research surveyed small business owners to find out what they expected from the Christmas period in terms of sales and their customers expectations. The results show that:

• 89 per cent predict that difficulty managing their finances will be a major concern for shoppers in the holiday period
• 83 per cent expect their customers will have to rely on credit cards for purchasing

Despite this expectation around card payment preference, less than half (48 per cent) of those surveyed currently accept cards and 76 per cent think that shoppers will be frustrated if they’re not able to pay by this method. In order to meet this demand and start to compete in this sector, a fifth (20 per cent) of those surveyed will look to start offering customers the ability to pay by card in the next six months.

Small business owners are also feeling increasingly pressured by their competitors coupled with it becoming increasingly challenging to capitalise on consumer spending, as demonstrated by the following findings:

• 77 per cent of those surveyed predicting greater levels of competition this Christmas
• 86 per cent of respondents predict that shoppers will go online to avoid crowds this festive season
• As a result, despite 42 per cent of those surveyed not currently trading online, 32 per cent are making plans to trade online in the future.

Jayadeep Nair, VP small business for Streamline commented: “Christmas is always seen as a profitable time of year but with recent reports of a double dip recession, it’s no surprise that many small business owners have concerns about their customers’ willingness to spend this holiday season. However, Christmas can still offer many opportunities, small businesses just need to adapt. Offering consumers preferred methods of payment, competitive pricing, increased promotional spend and a good atmosphere can all help to drive sales. Those business owners who are looking to expand their services next year, whether that is online or offering card payment facilities, are all moving in the right direction. To be successful small businesses must respond to customer demand.”