Third of businesses plan to raise finance in next 12 months

The report indicated that a third of businesses plan to raise finance in the next 12 months.  Of these 27% are targeting capital for business development and 23% looking to expand their premises, both represent increases from last year.  There has been a 25% fall in the number of firms looking for finance solely to fund working capital, suggesting that ambitions are rising. 

Compared to last year, the proportion of firms using borrowing or funding through bank loans and overdrafts fell significantly from 76% in 2013 to 62% so far in 2014.  Firms have also relied less on asset-based leasing, invoice discounting and credit cards.  

While red tape remains the largest single barrier to growth, concerns over managing cash flows is a close second.  Interestingly, this is seen as a problem of success rather than failure, with cash-hungry sectors such as production both more optimistic about the implications of growth are more concerned about the implications of growth on their short term funding than other industries.  Regulatory change and finding skilled staff were the third and fourth biggest challenges respectively. Despite the continued focus on a lack of bank lending to SMEs, access to finance is only fifth on SMEs’ list of concerns.

Patrick Reeve, Managing Partner at Albion Ventures said:

“The evidence from this year’s Albion Growth Report points to a growing sense of confidence among UK SMEs.  The next 12 months promise more jobs created, improved productivity and a stronger appetite for raising finance to support growth as opposed to survival. 

“What’s particularly striking about this year’s report is the emergence of so-called threshold businesses, which are on the cusp of blossoming from start-up to established business. Threshold businesses have tremendous potential to drive forward the UK’s economy in the years ahead but face serious challenges: for them, cash is tight and they need finance for growth; they value skilled staff but find it difficult to recruit them.  Recognising their own weakness and vulnerability they are much more likely to give up equity for hands-on support.” 

Emran Mian Director of Social Market Foundation said:

“While growth is back, there are some important puzzles about its character and this report provides valuable clues. For example, growth expectations are strong across many regions and sectors, belying the alarmism of those who suggest that we are in a solely consumption-led recovery focused on London and the South East. 

“While the role of bank finance is diminishing it is still the largest source of capital by far and a continued focus on efficient supply and competition in this sector is vital.  The big question is how to enable these businesses to make the most of the opportunities that they see ahead of them.”