In my latest Business Finance Bulletin Episode 101 I briefly reviewed a survey which revealed that businesses which keep up to date financial records are likely to grow twice as fast as those businesses with information more than nine months old.

This is such an important topic when it comes to raising finance that I thought I’d go into it in a little more depth.

The survey was carried out by KPMG Small Business Accounting and focused on how businesses can perform better when they have up to date financial information to hand.

KPMG found that small business’ management accounts are, on average, four months out of date, not a finding I can disagree with. However, more interestingly they found a direct link between having current financial information and likely growth rates.

They discovered that those with accurate information grew twice as fast as those with nine-month-old data over the last twelve months… 8% compared to 4%. A compelling reason if there was one to keep on top of your books!

This is a finding I can relate to. In arranging commercial finance for businesses, whether that’s for additional working capital or long term funding, one question the majority of lenders will ask is ‘can we see the latest management accounts’. Those who can deliver on the request have a far higher chance of getting finance than those who can’t.

On that basis, the survey’s findings that businesses with up to date figures are growing twice as fast is true – they are simply able to grab opportunities which their less organised competitors have to let slip through their fingers because they can’t get the finance arranged quick enough.

The researchers were also able to put a number on these lost opportunities. They estimate that with better financial visibility, small firms would have invested up to £1 billion more in the economy in the last financial year. Outdated financial information is resulting in lower levels of investment, employment, stunting productivity growth and holding back the economic recovery.

Many of the business owners I meet are the first to admit that they don’t like the financial aspect of their business and yet they struggle through trying to do the books themselves (usually in the wee small hours of the morning!), The survey found that small business owners spend more than two and a half hours on average each week trying to stay on top of their finances and probably doing a poor job or giving up!

The result of all this is that many business owners are making important investment and strategic decisions on the spot without a full understanding of their current financial position.

What’s the solution?

The answer is to pass the task of keeping your financial information up to date onto a bookkeeper or your Accountant; outsource it to the professionals. Concentrate on what you’re good at and get people in who love to crunch numbers.

The upshot of all this is the next time you are presented with an opportunity which needs finance then at least myself and other finance brokers will be able to move quicker and hopefully get you that all too elusive ‘yes’.

We’re continuing our look at the outcomes from the recent SME Finance Monitor Report for the first quarter of 2015.
The SME Finance Monitor Report is a quarterly survey carried out by an independent body tasked with researching the relationship between small businesses and how they finance themselves.

Previously we looked at what the real demand for finance is (‘What’s The Real Demand for Business Finance?’) and now we’re looking at what the outcome is for those businesses that did apply for finance from their bank.

First of all of those businesses thinking of applying for finance what was their level of confidence in getting a yes? The survey found that amongst those planning to apply, 49% were confident that their bank would agree to their request.

Let’s look at those businesses that said they had applied for finance and what actually happened.

In the 12 months to quarter 1 2015 18% of the businesses surveyed said that they had what’s referred as a ‘borrowing event’ whether that’s a new finance request or a renewal of an existing facility.

So what was the outcome?

The SME Finance Monitor team stretched it back further by looking at the previous 18 months and the success rate for new and renewed facilities was that 76% got what they wanted.

Is that a bit higher than perhaps you thought?

And that 76% was an increase on the 66% success rate reported 12 months previously… so the success rate is on the way up.

Let’s strip out those looking just to renew existing facilities – there the success rate was 98% got their renewal agreed.

What about those applying for new money being those that have borrowed in the past. That success rate is slightly lower at 65% but it is up from 46% a year ago… so again more progress with more businesses getting what they wanted.

For those applying for money for the very first time then the success rate is slightly lower at 55% but this has improved from the 37% seen in the 18 months to quarter 4 2013.

Remember at the start I said that 49% of businesses said they expected to get a ‘yes’ from their bank but as we have seen, the actual success rate is much higher.

It’s in closing this ‘confidence gap’ where our focus should be… getting businesses to realise that their chances of success in getting finance is actually higher than they may believe.

Growth typically needs finance so don’t hold back your growth by assuming you’ll get nothing and so you don’t ask… bad move!

Prepare your Business Plan, get your financial information up to date and start applying!

If you want to chat through your finance options then just book a call with one of the Business Loan Services team.

As we know access to finance amongst businesses has been tough and over the last few years the media has been filled with horror stories… but what is the reality on the ground?

Since mid 2011 an external body, the SME Finance Monitor team, has been carrying out quarterly independent research in to dealings between banks and small businesses when it comes to raising finance. Over the years the SME Finance Monitor Report has provided insight into what is really going on.

And the team has now released its latest report for quarter 1 2015.

So what are the key findings?

First the good news… 79% of those surveyed said they are now operating profitably.

This is up from 69% in the same quarter of 2013 – a significant improvement.

What about use of external sources of finance?

In quarter 1 of 2015 36% of businesses said they used external sources of finance.. that leaves a large number which are self-financing

Of those businesses using external finance 29% are using ‘core finance’ products such as overdrafts, loans and credit cards. This is down from 40% in the first quarter of 2012. This shows how businesses are moving away from the traditional sources of finance.

We often hear the statement that businesses are being starved of credit… well here’s the killer statistic which consistently comes out of this survey.

In the first quarter of 2015 48% of SMEs define themselves as ‘permanent non-borrowers’… they are not interested in borrowing and haven’t done so over the five years and don’t intend to in the future.

This was 30% in quarter 1 2012 so an increasing number of businesses are opting out of borrowing.
But what about business’ appetite to borrow over a shorter term?

The SME Finance Monitor team ask businesses about borrowing over the previous 12 months and looking ahead.

Here, 79% of businesses put themselves in this category – referred to as ‘Happy non-seekers of finance’

That’s nearly 80% of those surveyed saying they don’t want to borrow!

Added to that 72% of businesses said that their aim is to pay down their debt… and not borrow again.

So perhaps all the fuss about helping businesses to borrow is not as a big a problem as we think.

I’ll be returning to sharing more findings from the latest SME Finance Monitor Report so watch out for a future video.