SMEs face under-funding during economic recovery

Small-to-medium-sized enterprises (SMEs) are being warned to avoid under-funding issues during the critical economic recovery phase the UK is currently experiencing.

Businesses across the country are actually starting to see their finances improve according to research from Red Flag alert, with the amount of companies facing a ‘critical’ level of financial distress having decreased by 39% in Q2 2013, in comparison to the same quarter last year.

Comparing the last two quarters, the research also showed an improving picture with 3,001 companies in critical financial distress at the end of Q2, in comparison to 3,283 in Q1, a fall of 9%.

Partner at Begbies Traynor, Julie Palmer said SMEs should ensure they do not become ‘zombies’; businesses trading that cannot access the cash to progress: “We have real fears that many SMEs will have serious financial difficulties at the time they least expect – during a recovery.”

“Our experience has shown time and time again that many SMEs run out of cash during the recovery phase, as there is a real temptation to overtrade”, she concluded.

Andy Grantham, Sales & Marketing Director for Skipton Business Finance, said: “Businesses in need of funding would do well to look at sustainable and cost-effective finance solutions such as peer-to-peer lending and invoice finance solutions”.

Andy continued: “Invoice finance allows businesses to get access to cash they may have tied up in unpaid invoices, with factoring and invoice discounting both able to really boost the cashflow of the business in question”.