New entrants and cloud technology help reduce SME funding gap


Chartered Accountants Wylie & Bisset has said that new entrants into the market, coupled with the adoption of cloud-based accounting systems, are helping reduce the funding gap for Scottish SMEs.

Recent research found that the total overdraft limit available to Scottish SMEs had declined, resulting in a funding gap of over £800m, with SME finance provider Growth Street claiming that this is due to the high street banks’ reluctance to extend overdrafts to SMEs.

Gerald McLaughlin, corporate finance partner at Wylie & Bisset, welcomed the addition of new funding providers into a market where many SMEs encounter difficulties securing finance.

“New entrants and new offerings are helping fill the funding gap by providing additional ways for SMEs to borrow,” he said.

“Recent years have seen a shift from cashflow lending for SMEs towards more asset-backed finance options, such as invoice discounting, stock finance and asset-based finance, with alternative funders, peer-to-peer business lenders and challenger banks looking at a more holistic approach to funding and security.”

And with many SMEs adopting cloud-based accountancy software, McLaughlin suggests that many modern funders are able to make quicker decisions.

“Technologically-based modern funders can patch straight into an SME’s accounting software, which means they can access real time analysis of its finances, whereas, historically, funders requested management accounts on a quarterly or annual basis and that by the time they received that financial information it was already out of date.”

McLaughlin’s advice to SMEs seeking funding is speak to their accountant in the first instance to ascertain the availability of products and services on the market.

“SME owners should speak to their advisers as early as possible and engage regularly with their accountant to ensure that their adviser is aware of when growth capital or working capital funding is likely to be required,” he said.

“The more frequently they speak to their advisor, the more they will benefit from insight regarding forecasts and projections, such as working capital analysis, and have sufficient opportunity to develop a business plan, both for internal management, and with which to approach the most appropriate type of funder.”