SME's have little faith in government measures

Nine in ten owners of UK small and medium-sized enterprises (SMEs) believe the government’s recent initiatives have not been of any benefit to their business.

Respondents have very little faith in initiatives such as the Funding For Lending Scheme launched by the government, according to research by accountancy firm Shelley Stock Hutter.

Meanwhile, just 10% of small business owners believe the government's plans to launch a state-backed bank in 2014 will directly help their business, with six in ten adamant it will not.

Just a quarter of small business owners understand the benefits of the Enterprise Finance Guarantee Scheme whilst only a tenth have any knowledge on the National Insurance Holiday scheme.

Bobby Lane, partner at Shelley Stock Hutter says: “I’m not surprised that there is little or no understanding about the recent initiatives introduced by the government.”

He continued: “There have been a number of initiatives introduced for small businesses, but little supporting information or an education campaign to follow this up. As a result many small businesses are at sea as to how their business will gain and what steps have to be taken to benefit from the schemes.”

“The Enterprise Finance Guarantee Scheme has been a great help to some businesses. If businesses were made aware of how to access the funding and go about it in the right way, then there would be more successful applications.”

Lane adds that, for many businesses, this could mean the difference between survival and growth.

“The answer is not to saturate the SME marketplace with more initiatives but to make a concerted effort to provide more detailed information on existing schemes, the best way to access them along with the most appropriate way to finance their business.”

A third of SMEs will expect to fund their working capital in 2013 through more traditional routes such as a bank loan or via a bank overdraft whilst only one in ten expects to look to invoice discounting or invoice factoring.

Andy Grantham, Sales & Marketing Director at Skipton Business Finance, says that a bank overdraft, whilst a popular source of funding for SMEs, does come with common problems.

“We understand that the main problem with an overdraft is that it is repayable on demand and can be withdrawn at anytime. Also, the limit is usually fixed and, should more be required, the client generally has to go through the whole process again resulting in more time and cost.

Invoice factoring provides a much safer and more flexible funding solution for many SMEs simply by providing certainty of contract (i.e. not repayable on demand) and increased funding linked to sales and not the historic financial performance.”