How do you fund your growth?

by Zarrin Lilani - Wednesday, 20th August 2008 - - Business comment

As the economic situation worsens in the UK, we’re hearing reports that smaller businesses aren't managing their finances in the best way.

Research from HSBC shows one in five SME’s are being squeezed by their suppliers, who are billing quicker. One in five also say fewer companies are paying them on time. At a time where cash is king, this kind of behaviour is wreaking havoc on many small firms’ cash flow.

According to HSBC, 40 per cent of SMEs are raiding their savings while 24 per cent are relying on overdrafts to manage their everyday finances. Nearly one in five used their overdraft to fund big purchases, such as business vehicles and equipment, and 11 per cent are using their credit card to fund business investment.

Alarm bells ring louder when this is coupled with news from the Bank of England that the average business overdraft is an average 2.7 per cent above the base rate although this figure can spiral as high as 8 per cent.

But what other funding options are available to SMEs through this gloomy period? HSBC suggests asset finance and invoice discounting

Do these methods actually work? Is this type of finance available to you? And is it producing the right results? Give us your comments.

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