It reports that 54% of companies raising finance did so to purchase fixed assets or to expand, up from 39% two years ago, while the proportion of companies seeking finance to boost cashflow decreased from 45% in 2012 to 33%.

Although 68% of businesses surveyed said they were confident in their ability to obtain external finance, significant barriers remain for small businesses seeking finance.

A major barrier is the lack of awareness of various funding choices and sources of finance. The research found that, for the businesses surveyed:

• 85% were aware of lease or hire purchase;

• only 15% knew about mezzanine finance;

• some 36% were aware of angel investment as an option;

• although 55% were aware of venture capital, only 20% knew a specific supplier they could approach; and

• awareness of peer-to-peer lending and crowdfunding increased to 35% and 32% respectively, up from 24% and 13% in 2012.

The BBB & the Department for Business, Innovation and Skills (BIS) also conducted research into private equity finance for SMEs, which shows external equity investment in SMEs increased from £1bn in 2010 to £1.6bn last year.

Keith Morgan, CEO of BBB, (pictured above) explained: “It is clear from our research that there is increasing confidence among UK small businesses and an appetite for growth. The challenge now is to connect the emerging demand for finance with the new forms of funding that are becoming available.

“That is why the Bank is working to encourage innovation, promote diversity and share information, to develop a more broadly based and accessible lending market for smaller businesses.”

sklaroff stephen 

Stephen Sklaroff, director general of the Finance & Leasing Association (FLA), (pictured above) said: “We welcome the British Business Bank’s recognition that asset finance (leasing and hire purchase) is a market solution to the problem of small business lending, that it has a very high application success rate for the many SMEs which already use it, and is an important part of the UK’s investment recovery story.   “The BBB also recognises that asset finance will play an important role in the small business finance markets in future, and we look forward to continuing to work with them to ensure that even more SMEs are made aware of the advantages of asset finance.”

SME access to funding to take major step forward with new consultation

Meanwhile a new UK government consultation on legislation which will dramatically improve SMEs’ access to finance has been hailed as a major step forward by the Asset Based Finance Association (ABFA).

ABFA represents the asset based finance industry in the UK and the Republic of Ireland.

In a consultation document published to coincide with Small Business Saturday, (December 6), the government proposes regulations to invalidate clauses in supplier contracts that prevent SMEs from using their unpaid invoices to secure funding.

The ABFA explains that restrictions in contracts banning the re-assignment of debts are often contained in the contracts larger businesses have with smaller suppliers.  This will often mean that those smaller businesses are unable to get funding against the value of their unpaid invoices.

The Small Business, Enterprise and Employment Bill, which is currently being considered in the House of Lords, will enable government to make regulations to outlaw this practice.  The government is now consulting on how to implement these measures.

Jeff Longhurst, chief executive officer of the ABFA (pictured below), which has been calling on government to take action on this issue, said: “This is a major step forward in truly opening up SMEs’ access to finance.”

Longhurst jeff 

“It’s a clear sign that the government recognises the big part that the asset based finance industry plays in the SME funding marketplace and the even greater role it could play in the future.”

“Asset based finance has already become the biggest alternative to traditional lending, and as more businesses gain access, there is substantial capacity for further funding to be provided.”

“It has been a long time in coming, but we are delighted to see the issue of bans on invoice assignment clauses addressed. At last, this is going to bring the UK into line with many other jurisdictions around the world.”

Longhurst added: “These contractual restrictions place onerous and unnecessary restrictions on the freedom of UK businesses to use one of their most significant assets - the debts owed to them by their customers as represented by their unpaid invoices - to access finance.  These are unacceptable restrictions, particularly in the context of ever-lengthening payment terms being imposed on smaller suppliers.”

“These measures will particularly benefit the smaller businesses that tend to be lower down in the supply chain and go some way to redressing the balance of power between small suppliers and larger customers. In turn this will benefit the wider economy as a whole.”