Cash flow biggest concern among UK SMEs

The research points to a widespread requirement for financial services, including invoice finance, to smooth out peaks and troughs in business income.

This is particularly the case in sectors which suffer from delayed payments for services, including construction.

Recent analysis by Funding Options, the online business finance supermarket, found that businesses in the UK construction sector have been hit by a leap in payment delays, with invoices taking an average of 69 days to be settled.

Slow payment of bills is a major reason why the construction sector has such a high number of insolvencies; 2,557 construction firms entered insolvency during 2016.

Despite the potential benefits of using finance, fewer than one-third of UK companies say they have used asset finance or plan to use it in the next year.

Niche bank Cambridge & Counties Bank found only 26% of companies surveyed said they were planning on using asset finance over the next 12 months.</>

Instead, most SME owners have invested personal funds into their companies to avoid borrowing money.

Hitachi Capital Invoice Finance looked at SME attitudes to borrowing and found that 72% of business owners have invested their own funds in the past year, with eight out of 10 using personal savings, around a quarter using credit cards and 12% using overdrafts.</>

For new start-up businesses, 91% of owners have invested their own money, compared to 69% for more established companies.

The research showed an aversion to borrowing money, with only 17% saying they didn’t mind sourcing finance to fund their business.

The main reason for not wanting to borrow money is that companies want to owe out as little as possible (54%).