News and Events

Debate provides food for thought

11/05/2012

As the debate rages on about just how challenging it is for businesses - and SMEs in particular - to access funding in these uncertain times, experts and leading figures from a range of organisations yesterday discussed the current state of affairs at Close Brothers Invoice Finance Senior Business Leaders' Breakfast and Panel Debate.

Held at ICAEW, Chartered Accountants' Hall, the absorbing debate was chaired by the BBC's Economics Editor, Stephanie Flanders, who encouraged panellists from the Forum of Private Businesses, Institute of Directors, ICAEW, Better Capital and Close Brothers to share their experiences and insight.

The economy

Interestingly, the panel struggled to put their finger on positives that George Osborne had introduced since becoming Chancellor, but did highlight his commitment to reducing the rate of Corporation Tax as a major plus point that will hopefully deliver growth. In the main, though, the coalition's strategy to return the country to growth was blamed for the reason the country has continued to struggle over the past 12 months, together with the Eurozone crisis that continues to rumble on.

Despite this however, the entire panel was optimistic over the economy's chances in the coming 12 months and insisted that progress will be made.

Low confidence was cited another significant major factor behind the stuttered growth, with many businesses arguably putting aside their cash for a rainy day. Additionally, the deteriorating health of the country's high streets, which are seeing shops both large and small close down with consumers also demonstrating low confidence, was used as an example to demonstrate the gravity of the situation.

Yet it was argued that the recession shouldn't be seen as a major problem through the eyes of business owners, but rather a chance to take advantage of the opportunities that present themselves by doing different things.

Funding

Access to finance was high on the agenda. But despite several sets of recent lending statistics pointing to businesses not being able to access the traditional forms of funding they require, the panel argued that the falling lending figures were actually a consequence of businesses not approaching their bank in the first place. Is demand therefore the issue rather than supply?

David Thomson, Chief Executive of Close Brothers Invoice Finance, went further to suggest that businesses don't know where to turn once their applications for loans and overdrafts are turned down. Instead, he argued that asset based finance remains available and has helped to fill the funding gap in recent times – as evidenced by the Asset Based Finance Association's statistics – but more needs to be done to inform businesses as to the options at their disposal.

While the government is beginning to recognise its advantages, it is hoped that this publicity will soon filter down to SMEs. But Mr Thomson argued this is principally the role of the asset based finance industry, accountants and brokers; continuing to communicate the message to clients and prospects of the benefits of asset based finance and additionally the other non-traditional funding options that are available to help boost the cash flow.

Support

In the context of the government's attempts to stimulate lending, the panel also argued that the government's various schemes, such as the Enterprise Finance Guarantee (EFG) scheme and recently launched National Loan Guarantee Scheme, have failed to live up to their billing and have come at the expense of the previously successful Small Firms Loan Guarantee scheme, which the EFG replaced.

Yet Richard Welland, Managing Director of Sovereign Rotating Machines - a specialist supplier of auto-electrical products - argued that businesses simply need to ensure they have a sound business plan in place. This demonstrates to the banks that you know what you're doing, but urged small business owners to explore different options to an overdraft or bank loan:

"If you've got a solid business that needs financing, my advice is to look at asset based funding as I genuinely don't think there's a better way of doing it."