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External funding: sin or saviour?

By Sean Read, Wesleyan Bank

Commercial Lending 500

Sourcing external funds can be a crucial part of helping your business to grow, however in Wesleyan Bank's recent survey of UK small business owners 70% say they've never utilised finance.

The report, 'SME Attitudes to Finance', explores SME owners' reasons for not doing so and considers the potential impact this mindset could have on their business prospects.

The research uncovered that the main reason SME owners choose not to borrow money is the risk of getting into debt, with 78% admitting this is what holds them back. Other common factors include loss of control, for 55%, and 45% admitting to not wanting to give a share of their business away.

These were more serious concerns for older business owners, whereas younger owners stated it was more down to a lack of knowledge, time and finding the process too complex.

Their business bank's attitude towards them as an SME was cited as the fourth 'borrowing restriction', for 31%, mirroring the findings of the BBA, which suggested that until recently bank applications from SMEs have slowed.

Despite the reluctance of some, the right external finance can be both a business lifeline and a growth accelerator. Countless alternative options exist, ranging from short term loans to ease cash flow to asset finance in order to quickly take advantage of new market opportunities.

Specialist providers, such as Wesleyan Bank, provide tailored solutions and advice for SMEs by meticulously guiding them through the finance options available and how the correct funding can work for them.

Here are five reasons why SMEs should reconsider their attitude to external finance:

  • 1. Drive growth and innovation.
    Specialist payment over time financial solutions can allow your business to expand and take advantage of market opportunities when they are ripe! Whether you need to finance more staff, office space or new equipment or technology, funding can make this happen when you need it, not when your bank balance says you can.
  • 2. Strengthen your business plan.
    Working with finance experts to breakdown your business plan and outcome objectives will not only help you to realise external financial support but also highlight any areas for improvement, therefore creating a stronger overall strategy.
  • 3. Gain greater flexibility - it doesn't have to be one big loan!
    If the thought of taking out one big loan makes you feel uneasy, consider the opportunity to 'spread your bets' by segmenting your finance and using different sources.

    Different elements of your business plan may require contrasting types of funding at different times and breaking the loan up could work in your favour.
  • 4. Boost cash flow
    Do you have a major annual expense coming up, such as a looming VAT or tax bill? If so, external finance can help during these costly periods. Instead of having to pay out a large lump sum and restricting your ability to invest, businesses can spread the cost over a year into smaller, more manageable chunks.
  • 5. You don't have to be reliant on your business bank.
    Your business bank may not be the safest or only option. With many alternatives available to SMEs, it's important to understand how alternative finance providers may be able to add greater value by fulfilling your ongoing business requirements.

'WESLEYAN’ is a trading name of the Wesleyan Group of companies.

Wesleyan Assurance Society and Wesleyan Bank Ltd are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Wesleyan Financial Services Ltd, Wesleyan Unit Trust Managers Ltd, Practice Plan Ltd and DPAS Ltd are authorised and regulated by the Financial Conduct Authority.  Advice about investments, insurance and mortgages is provided by Wesleyan Financial Services Ltd.

Click for more information about the Wesleyan group of companies.

© 2021 Wesleyan Assurance Society