More SMEs looking to future by stockpiling cash
Reports suggest that many of Britain’s small companies are stockpiling cash more than ever before in a bid to build up savings.
Postcode-lending data suggests that businesses in 95% of postcode areas had more cash on deposit in 2012 than in the previous year.
While other reports suggest SMEs are struggling to borrow money, access to finance is an increasing problem and it is leading many SMEs to consider their options.
Therefore, it seems that building up funds via savings was forced upon some companies as they looked to restructure to avoid company administration procedures.
Britain’s SMEs account for 99.9% of UK businesses and amass around £3.1 trillion of the country’s annual wealth – just below 50% of overall turnover.
As a result, those that looked to save when the going got tough are in a much stronger position than they otherwise may have been.
The value of taking a wider view
It follows a similar pattern to the Mittelstand businesses found in Germany where the main focus is always on longevity.
Put simply, companies with cash reserves have a stronger chance of avoiding major financial problems as they can overcome any potential barriers to development that may crop up.
Issues like using old machinery or operating from older buildings can be tackled, as 65% of SMEs with such problems lose money as a result.
SMEs are also seeking alternative solutions such as peer-to-peer lending, whereby investors see potential gains and invest in businesses to drive improvement and expansion.
Meanwhile crowd-funding can help entrepreneurs to develop and market ideas, while asset finance can allow companies to make investments in new machinery and similar products.
This provides alternative options to drive innovation and means SMEs can lead the way in the economic recovery.
It is estimated that a lack of awareness of asset finance could be costing SMEs in the region of lost business.
But no type of funding is guaranteed to be successful, so the fact that many businesses have savings built up should pave the way for a stable yet flexible future.
By Phil Smith