SMEs seeking funding to drive growth
A third of small- and medium-sized enterprises (SMEs) currently seeking funding are doing so to promote business growth, according to research from alternative finance provider Growth Lending.
This is despite record-high inflation and the ongoing cost-of-doing-business crisis.
The legal industry appears to be the most growth-minded sector, with 67 per cent of those seeking funding citing growth as the reason, with energy and utilities and technology following closely behind at 60 per cent and 54 per cent respectively.
While growth remains a priority for many, the survey of 279 UK SME business leaders found that almost a quarter (23 per cent) were seeking funding to raise additional working capital.
With more than two thirds (67 per cent) of SMEs having at least £50,000 tied up in late payments, it is possible that many are raising additional funds to create a cash buffer to mitigate the impact of overdue invoices on the business.
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The report also found that ongoing economic challenges are taking their toll on SMEs.
Almost a fifth (19 per cent) of those seeking funding were doing so to cover increased overheads such as rising energy bills and the higher cost of goods, while 14 per cent were looking to secure funds for contingency planning in the current environment.
In contrast, hiring more staff (six per cent), investing in R&D (three per cent) and undertaking M&A, MBO or MBI activity (two per cent) ranked significantly lower among the reasons for raising funds, suggesting that many are navigating the current landscape with caution.
Meanwhile, fears around the current trading environment are holding 32 per cent of SMEs back from raising external investment altogether.
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“Understandably, caution remains the watchword for many business leaders as more uncertainty lies ahead and for others, it has eroded confidence and paused lending decisions altogether,” said Growth Lending managing director Lauren Couch.
“Frustratingly, rather than being perceived as a means to strengthen and reinforce cash flow in challenging times, it is clear that many still associate certain types of funding with weakness and vulnerability.”
Couch said the ongoing economic situation and impact of recession are likely to cause many lenders to retreat. She advised businesses to start the funding journey now and look beyond traditional finance streams, to stand a better chance of receiving the right support.
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