SMEs reveal reluctance to borrow finances
More small businesses are now defined as permanent non-borrowers according to new research, suggesting that many firms are unwilling to access finance.
The SME Finance Monitor found that 48% of small firms are in this category, with seven in ten opting to focus on paying off debt before accessing new sources of money.
To be classed as a permanent non-borrower, a company must not use external finance for a five year period preceding the survey.
Only a third of firms were willing to take out external finance to support growth while 27% said they were not prepared to take such an approach, despite current market conditions.
BDRC Continental carried out the study which pinpoints two distinctly different attitudes towards finance in the first quarter of 2015.
While the group of firms that does not want to look for new methods of gaining finance is growing, BDRC suggests that it masks some of the approaches taken by the other half.
These firms are looking for finance and are keen to grow in the wake of improving economic conditions and greater demand for business services.
Financial management is constantly at the forefront of any business plans as it ultimately limits what can and cannot be achieved.
For companies that do not need to borrow, they are likely to have a solid financial base that means they can operate in an efficient manner.
Smaller companies with ambitious growth plans can also access finances from banks and alternative lenders should they so wish.
However, lending is not without risk and these businesses should carefully assess their financial situations before deciding on a course of action.
Failing to properly plan could ultimately lead to financial losses or even the threat of company administration in severe circumstances.
Finding the balance between expansion and stability is key, as such an approach can help to ensure both the longevity and development of a business.
By Phil Smith