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Solving the SME problem that refuses to go away: growth

Back in 2012, the Federation of Small Businesses (FSB) reported that SMEs were struggling to raise the money they needed to expand. At the time, it found that 42% of SMEs who applied for a loan said they were turned down. That was then, though – surely things have changed?

Unfortunately, not much. In fact, accessing finance has got harder, if anything. A 2017 study by American Express revealed that 57% of SMEs struggle to obtain finance. Meanwhile, in a 2018 study by the British Business Bank, one in three SMEs said that they wanted to grow their operation, but were unsure how.

These findings tally with our own research. Nearly half (49%) of the 250 decision makers in our survey, conducted by Atomik Research in August 2018, said a lack of funds for equipment has prevented their business from scaling up. In fact, 68% of businesses find it challenging to access funds for equipment, full stop. The struggle for budget is particularly tough in the manufacturing sector, where 84% of businesses said they find it hard to buy new equipment.

Without the latest equipment and technology, growth is out of the question. In order to grow, businesses need to have the capacity to take on more work, while maintaining relationships with current customers. That’s not always possible when staff are using outdated equipment that’s preventing them from working as efficiently as they can.

What’s the solution?

Business decision makers understand that new equipment would allow them to serve their current client base better and open up their products/services to new customers. When we asked how they think they’d benefit if they were to purchase additional or upgraded equipment, the most common responses were:

  • Increased quality of products/services (38%)
  • Faster delivery of products/services (37%)
  • Enhanced communication with customers/clients (34%)
  • Enhanced communication within the business (30%)
  • Enhanced reputation for innovation (30%)
  • Ability to increase customer base (30%)
  • Increased profit margins (26%)

Here’s the problem, however, with buying new equipment outright: it means having to spend large amounts of capital, or going out and using existing lines of credit such as bank loans (if you’re able to get one) or overdrafts. Both of these options are not going to make any business leader comfortable – having capital in the bank is crucial for any business with ambitions to grow, while bank loans and overdrafts should surely be saved for more appropriate times and uses?

There is another way which enables you to keep hold of your capital, without having to go to the bank for a loan or an overdraft agreement.

By leasing the equipment, your business doesn’t have to worry about spending large sums of cash on an asset that is likely to lose value during the repayment term of your borrowed funds, whether the equipment is used or not. With asset finance you pay as you use, alleviating cash flow by spreading the cost. Often, your agreement can begin with just the initial payment.

With some finance options, you can even upgrade your equipment at any time, allowing you to decide when it’s the right time to grow your business, rather than having your fate put in the hands of banks.

If you’re ready to discuss your business finance options, give us a call on 01827 302 066 or request a callback here.

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Shire Leasing

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