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Average SME plans to invest £321k to grow their business

New research from Aldermore’s SME Growth Index has revealed the investment and growth plans of small and medium-sized enterprises (SMEs) in the UK. Despite the ongoing cost-of-living crisis, SMEs plan to spend an average of £321K on growth strategies over the next year. One in eight (12%) SMEs plan to spend over £1 million investing in growth.

SMEs plan to grow online but curb talent spend

A third of businesses want to expand their customer base (33%) and grow their current products and services (29%) in 2023, while also reducing costs to combat the cost-of-living crisis (30%).

To reach their goals, business leaders plan to invest in their online presence. One in four SMEs (26%) will put money into improving or building websites and apps over the next year. This is in addition to investing in digital marketing (24%).

Interestingly, following the ‘Great Resignation’ fears that saw SME-leaders prioritise talent spend in 2022, talent acquisition and increases to employee salary and benefits are likely to see the least investment (17% each respectively) over the next year.

Business leaders continue to put hands in their own pockets to invest

SMEs will often turn to business savings (27%) or various forms of business finance (e.g., asset finance – 11%) to meet their goals. However, nearly two out of five SMEs (18%) will turn to their personal savings and over one in ten will use their own overdraft (12%) to meet business costs.

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Barriers to growth

Despite optimistic plans to invest heavily in the coming year, the biggest concerns SMEs are faced with are high energy costs (24%) and double-digit inflation rises (24%). This will represent the biggest barrier to business growth in 2023.

Those concerned about inflation costs estimate it could lead to delays in existing projects (19%), missed opportunities for growth (21%), and difficulties securing new deals (20%).

Tim Boag (pictured), group managing director of business finance at Aldermore said: “SMEs are the backbone of our business community and their ambitious growth plans over the next year bodes well for the economy, however they also face challenges brought about by high inflation and soaring energy costs.

“At Aldermore, we’ve supported SMEs through challenging times. It’s great to see from their plans that a digital presence for many has become a major priority, as consumer expectations have evolved post-pandemic.

“For business leaders, there are many sources of investment, be it utilising savings or accessing a range of specialist finance products; and at Aldermore we remain fully committed to backing businesses to realise their ambitions.”

By Lisa Laverick

Source: Asset Finance International

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Asset-based funding is vital route for many businesses

Asset Based Lending (“ABL”) remains an important route to funding for many retailers, wholesalers and manufacturing small to medium enterprise (“SME”) businesses in particular; and will continue to be a key access to funds both in its current guise and in future form as funding and security pools change. ABL remains the most fluid and flexible form of security with SMEs reliant on floating charge lending incorporating inventory revolving facilities along with the primary invoice finance form of ABL supported by additional plant and machinery and property term loan facilities.

Investors use ABL to support acquisitions, as do MBO/MBIs deals, both of which have maintained traction amid economic and market uncertainty. Brexit has presented many challenges for UK businesses reliant on or exposed to Europe with some stockpiling due to the unknown, tariffs and variable trade restrictions that may well be implemented, which can prove to be an issue when cashflow is tight. Purchasing in advance leads to reduced cash availability in order to thrive withadded costs hindering a business. ABL eases cashflow issues and concerns via fixed and floating charge facilities.

ABL enables business to raise higher levels of funding to facilitate strategic plans or simply release additional working capital. ABL can offer higher levels of funding than invoice finance alone and release working capital against inventory, plant and machinery and property as noted. ABL is a bespoke solution, designed around a borrower’s specific requirements. For businesses with proof of strong cash generation in the past and positive cash forecast for the future, cash flow loans may also be available to further top up funding lines where appropriate.

Further risks loom with UK ABL under threat from the 2020 Crown Preference plans with proposals for the crown to be preferential in respect of floating charge lending that would likely impact inventory in particular. Undoing the Enterprise Act effectively leads to the crown once more ‘jumping the queue’. Lenders secured on an inventory floating charge may well be exposed and under collateralised in an insolvency. Crown liabilities need to be up to date to mitigate exposure and risk. Should proposals be approved; and there continues to be a great deal of opposition, floating charge lending could be as risky as unsecured lending. The UK needs reliable access to ABL funds to operate; and putting floating charges at risk may restrict access to flexible funding in the future, which will only be detrimental to HMRC in the long term.

We are perfectly positioned to support lenders and SMEs through the challenges and risks ahead offering advice and due diligence to assess the exposure and options to mitigate the risk. We provide independent and specialist all asset class valuations and sector guidance relating to inventory floating charge and receivable fixed charge facilities, along with plant and machinery and property term loans.

Source: The Business Desk

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39% of brokers expect asset finance demand to increase in 2018

Almost two-fifths of brokers (39%) believe that demand for asset finance funding will continue to increase in 2018, according to the latest United Trust Bank survey.

A quarter (25%) expected asset finance demand from SMEs to stabilise, while 8% believed lending activity would decline.

Some 28% of brokers were unsure of what 2018 had in store and selected the “don’t know” option.

When asked which industry sectors were likely to drive demand for asset finance in 2018, brokers chose the construction industry as the most likely sector, followed by transport and waste management.

Martin Nixon, head of asset finance at United Trust Bank (pictured above), said: “There’s no doubt that awareness of asset finance is growing among UK SMEs.

“Lenders, brokers and industry bodies – such as the FLA and the NACFB – are working hard to spread the word about the versatility and flexibility of asset finance and how quickly and easily transactions can be completed.

“Dealing with a professional asset finance specialist is a far cry from what’s involved in trying to raise a business loan from a high street bank or applying to increase your company overdraft.

“Brokers have known this for years, but the message is now getting through to business owners across the country, and this is good news for everyone.

“The government’s push to tackle the housing shortage should mean that construction and housebuilding companies are kept busy for the foreseeable future.

“As a result, we also expect significant activity in the funding and refinancing of new and used construction plant and machinery.”

Source: Bridging and Commercial