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Lending on the rise for UK businesses

Following months of criticism over low levels of lending, UK banks are finally taking advantage of the Funding for Lending Scheme. Data released by the Bank of England shows that 34 high street banks lent an extra £600m to small businesses in the first three months of 2015. Better still, the banks generated a further £4.9bn of borrowing allowances, suggesting that they intend to continue the trend over the coming months. Lending, UK Business, SMEs

It isn’t just banks that are predicting increased demand for lending in 2015 either. Senior economist Samuel Tombs of Capital Economics told The Financial Times: “with business confidence high, borrowing rates still low and consumer demand growing strongly, both small and larger businesses alike are likely to seek more credit in order to expand over the rest of 2015.” 

Tombs’ argument is backed up by economic stats from the Enterprise Research Centre which show that, by the end of 2014, SMEs had created more jobs than were lost in the recession and that this growth looks set to continue into the future. 

At this crucial juncture, SMEs would be wise to consider growth strategies carefully. The latest lending data shows that, despite the recent increase in available funds, gross lending has decreased over the past 12 months. In other words, UK SMEs are still paying off loans faster than banks are handing them out, which suggests to us that the flow of money from banks to businesses is not yet as reliable as some are suggesting.

The number of asset managers entering the lending market is increasing in number, providing funds to businesses or buying up debt, and alternatives like peer-to-peer lenders fill gaps left by reticent banks. If economic recovery is to be sustained with help from these lenders, however, it’s vital that Britain’s SMEs research the potential risks. 

As we move into the second quarter of 2015, there’s plenty of cause for optimism, and we believe that businesses can continue to grow and improve the economic landscape. This said, we advocate a measured approach, assessing the relative merits of each lender before accepting the funds that could take your business to the next level.

For advice and assistance on maintaining your cashflow and enforcing the payment of outstanding debts, contact a Dukes Bailiffs advisor today.

British SMEs' swiftest growth in seven years

According to data from the Enterprise Research Centre (ERC), more than 600,000 new private sector jobs were created last year as the number of small and medium-sized enterprises (SMEs) grew at the fastest rate since the financial crisis hit in 2008.

Fighting the recession SME growth

Small Business Minister Anna Soubry commented: “small and medium businesses in every corner of the UK have shrugged off adversity to create jobs and grow”.

SMEs showed remarkable resilience and ingenuity during the recession, creating 13.4m jobs over the past seven years. Over the same period, however, 13m jobs from other sectors were lost, meaning that it wasn't until 2014 that net private sector job creation became positive.

This suggests that, although small business owners and entrepreneurs have worked quickly to create opportunities, there is still a serious amount of instability in the job market on the whole, which must be addressed if the UK is to build upon gains made by SMEs and show consistent economic growth.

Continued growth

Business Secretary Sajid Javid argues that the future will be bright for SMEs, thanks to the new Enterprise Bill, which aims to cut red tape and make it easier for small businesses to succeed and create jobs. Additionally, they will benefit from the introduction of a Small Business Conciliation Service that will deal with payment disputes with larger clients/suppliers.

While we welcome government attempts to reduce the burden on small businesses, Dukes Bailiffs believe SMEs must also be pro-active in improving their cash flow and maintaining stability while the economy revs up to full power. Making small structural changes can make a big difference. In particular, ensuring invoices are sent promptly and that they contain clear payment information, showing the risk of interest charges and legal action in the event of late payment, is vital.

If Britain’s SMEs can match their vision with this kind of prudent planning, we’re confident that the ERC’s growth record will be broken many more times in the near future.

For further assistance developing your payment processes and recouping unpaid debt, contact a Dukes Bailiffs advisor today.

The impact of SME debt on the economic recovery

Last week, billionaire hedge fund manager Crispin Odey aired some controversial views about the state of the global economy and the risk of a serious recession. Debt was central to his damning verdict.Business man

Boom and bust

Speaking to The Guardian, Odey argued that for the past 60 years recessions have been short because lending expanded quickly afterwards. This time, however, that expansion has been negligible, putting the global economy at risk of short, unpredictable boom-and-bust cycles like those suffered by Japan over the past 20 years.

The central banks have already put interest rates down to zero but, Odey says, this is the last trick they have to stimulate growth, and it's not looking good. But why isn't it working? In the case of SMEs, a study by the University of St Andrews and the London School of Economics and Political Science suggests that it could be a combination of lack of trust in banks after the credit crunch and a resistance to handing control of the business to outside influences.

This assessment fits with the government's approach and the European Commission's plans to set up a Capital Markets Union to remove barriers to cross-border assessment, both of which seek to encourage SMEs to borrow more. But this doesn't address one of the key problems.

Tackling mounting debt

Credit supply may be crucial to healthy cash flow for British SMEs, but mounting debt is a serious risk. Last year the International Business Times reported that UK SME debt in trade averaged £1.3m per company, and the Institute of Business Ethics warned that late payment practises were rife.

Instead of simply taking on more debt, we at Dukes Bailiffs believe that businesses should address these core issues by taking a more proactive approach to their cash flow by managing financial timelines and, in particular, approaching their debtors as soon as possible.

As well as attempting to claw back debts, this proactive approach means SMEs should be realistic in writing off bad debts too. This is in line with what Odey advises we do for the greater good of the economy. For advice on taking control of your debt, visit our Contact Us page.

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