Financial services SMEs going for growth despite challenges
Despite record-high inflation and the ongoing “cost of doing business” crisis, growth is still the most common reason that financial services SMEs are seeking funding. New research from non-bank lender, Growth Lending, has found that over a third (39%) of businesses in the financial services sector currently seeking funding are doing so to promote business growth.
While growth remains a priority for many, the survey also found that 13% of financial services SMEs are seeking funding to raise additional working capital. And, with 80% of SMEs surveyed having at least £50,000 tied up in late payments, it is possible that many are raising additional funds to create a cash buffer to mitigate the impact of overdue invoices on the business.
The ‘Don’t Bank On It’ report also found that ongoing economic challenges are taking their toll on SMEs in the sector. Almost a third (30%) of those seeking funding are doing so to cover increased overheads such as rising energy bills and the higher cost of goods, while 17% are looking to secure funds for contingency planning in the current environment.
In contrast, hiring more staff , investing in R&D and undertaking M&A, MBO or MBI activity ranked significantly lower among the reasons for raising funds, suggesting that many are navigating the current landscape with caution. Meanwhile, fears around the current trading environment are holding 29% of financial services SMEs back from raising external investment altogether.
Commenting on the findings, Lauren Couch, managing director of Growth Lending said: “Despite the challenging backdrop of geopolitical and economic uncertainty, it is positive to see that many SMEs in the financial services sector are still operating with a growth mindset and raising investment to support their plans.
“Understandably, caution remains the watchword for many business leaders as more uncertainty lies ahead and for others, it has eroded confidence and paused lending decisions altogether. Frustratingly, rather than being perceived as a means to strengthen and reinforce cash flow in challenging times, it is clear that many still associate certain types of funding with weakness and vulnerability.
“There are a wide range of lending products available to support SMEs and help them to survive – and thrive – in the coming months, whether businesses are looking to unlock the cash tied up in their debtor book, improve cash flow overall, or accelerate growth strategies.
“However the ongoing economic situation and the forecasted impact of recession are likely to cause many lenders to retreat; by starting the funding journey now and looking beyond traditional finance streams, business leaders stand a better chance of receiving the right support to help them remain more agile and resilient in the face of the unknown.”