Are UK small businesses getting the credit they deserve?
With the latest figures indicating access to credit is continuing to fall for small businesses, are there any signs this is likely to change in the near future?.
Access to credit still elusive for small businesses
Despite many signs of an approaching, if modest, economic recovery such as FTSE 100 growth and house price inflation, credit is still hard to come by for many small businesses. A report by the Association of Chartered Certified Accountants observed the supply of credit in the third quarter of 2009 was “still not far from April’s trough, nor is it on a clear upward trajectory”.
While it might be surmised that this lack of lending is, in part, due to small businesses seeking less credit, however, evidence suggests otherwise. Indeed, most small business owners are bemoaning the banks’ lack of willingness to extend them the credit they need to support their business in difficult times. A somewhat worrying effect of this apparent imbalance of supply and demand is an increase in small businesses using credit cards - a notoriously expensive credit solution - to bridge the gap.
Commenting on the state of credit supply to UK small businesses, David Kern, chief economist at the British Chambers of Commerce, said “Access to finance remains a critical obstacle to a much-needed revival in investment." So what is the outlook for those searching for cash in 2010?
New entrants to the banking sector mean increased competition should bring down the price, and increase the availability, of credit. Big brands like Virgin and Tesco might be familiar names to us, but they’re young upstarts to the Big Four that currently account for 75% of the UK banking market. And their arrival in the sector later this year should shake things up.
However, rather than waiting for the banks to get their act together, there has always been stable and credible forms of finance available and many small businesses are accessing credit without relying on the big banks - many have opted to draw down on their invoices using invoice finance. Indeed, some have found invoice finance has improved their financial independence and liquidity to such an extent that it is now fully integrated into their business models.
For expert finance advice for your clients, call Cashflow UK on 0800 132 156.
