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One in three SMEs use personal funds to meet business goals

  • SMEs turn to personal funding streams rather than seeking finance solutions according to research from Hitachi Capital UK
  • One in three (30%) businesses dig into their own pockets, 16% use overdrafts and 7% turn to family money; yet only 21% access finance support
  • One third of SME owners are worried about cash flow meaning understanding all financial options is critical

Businesses are failing to access the full range of financial solutions that could help them drive business growth. As half of small businesses need support with cash flow across the year, it’s important that they are accessing the most effective option for them.  

Only one fifth (21%) of SMEs have used financial support, including business loans, invoice finance, peer-to-peer lending and finance leasing, in the last 12 months, according to new research from Hitachi Capital.

Instead businesses turn to their own bank accounts (30%), overdraft facilities (16%) and their own families (7%) to access the cash needed.

At a time when SMEs are struggling to expand and grow their teams – six in 10 SMEs (60%) are expecting to stay at their current size or scale down and only 6% were expecting to experience significant growth – effectively accessing finance and managing cash flow is essential.

Cash flow was identified as the biggest worry for SMEs, with almost one third (30%) of small business owners saying they are being kept awake at night by this issue. Worries are caused by a range of things including late payments from customers and unexpected costs and charges.

Insight from Hitachi Capital showed that April, July and October are the times when small business owners are most in need of help and when cash reserves are low, making it even more important to plan ahead.  

April, the beginning of a new tax year, forces SMEs to get up to speed with a host of new legislation, including the new National Living Wage and several new immigration laws.

In July, holiday season and a reduced workforce takes its toll on smaller companies, while in October businesses are under pressure to meet the retail demand of Black Friday and the festive period.

Financial solutions, such as invoice finance and business loans, can help small businesses to deliver efficient and successful operations across the year. 

“The UK’s SMEs account for 99% of our entire economy, so it’s critical that we enable them to efficiently manage their business and support them in their growth ambitions” said Gavin Wraith-Carter, Managing Director at Hitachi Capital Business Finance.

 “Peaks and troughs across the year are inevitable for any small business and accessing financial solutions can help manage these periods as well as helping to overcome any unexpected hurdles.

At a time when many banks are withdrawing overdrafts and cutting back on business loans, business owners need to consider the full range of options available to them. Innovative finance solutions, such as invoice finance, business loans and finance leasing, are cost effective, simple and straightforward, and can help prevent sleepless nights for SME owners.”

The research, commissioned by Hitachi Capital, surveyed over 1,000 small business owners on their business outlook for the next 12 months.