Asset Based Finance Association

September 03, 2009 13:53 ET

Latest ABFA Research Finds That SMEs Struggle to Understand Finance Options

LONDON, UNITED KINGDOM and IRELAND, UNITED KINGDOM--(Marketwire - Sept. 3, 2009) - According to the new research by the Asset Based Finance Association (ABFA), 56 per cent of SMEs aren't aware of the amount of financial support available from the Government.

The SMEs were asked by the ABFA if they were aware of the Enterprise Finance Guarantee Scheme, Working Capital Scheme or the Capital Enterprise Fund, which have all been developed by the Government to provide much needed financial support to the country's small businesses. A massive 56 per cent came back and said that they hadn't heard of any of the schemes.

Kate Sharp, chief executive officer from the ABFA, believes that SMEs are at risk due to a lack of understanding about the Government's financial offerings. She said: "Over the last few years, the Government has stepped up to support UK SME organisations through various schemes. Unfortunately, there is a severe lack of understanding among this group about what financial support is actually out there. If they don't know about the schemes, how can the Government help them?"

The research also highlighted that obtaining credit insurance is also an issue for SMEs. Credit insurance minimises the risk of customers defaulting on payments or them going into administration. Of those interviewed 78.8 per cent said that as much as 20 per cent of their client base had been refused credit insurance over the last six months. More worryingly, 2.6 per cent said that over 81 per cent of their clients had no credit insurance whatsoever.

This means that nearly 100,000(1) SMEs in Britain are putting their businesses at risk by not ensuring they are fully protected. These firms are denying themselves the opportunity to manage the risk of losing money and reducing their own credit ratings, which will impact on their ability to obtain credit from suppliers.

The time it takes for invoices to be paid is also extending, as average debtor days lengthen. Over 11 per cent of respondents report that it is taking over 70 days for them to get paid compared to just 6.6 per cent last year - that is more than double the normal trading terms.

Kate Sharp continued: "With the external pressures on SMEs growing daily, it is worrying to see the reduced availability of credit insurance putting extra pressure on these companies at a time when they are already facing many other pressures. Coupled with the fact that debtor days are extending, it is more important than ever that businesses try to protect themselves against unforeseen circumstances."

The research also suggests that unemployment may slide further with 81 per cent of SMEs questioned planning to make as much as 10 per cent of their workforce redundant over the next six months.

Over 2,000 SMEs were interviewed for the research, which was undertaken by Hilton Baird Financial Solutions, and were asked about the current state of their finances, the wider economic troubles and attitudes towards asset based finance.

About the ABFA

The ABFA is the body that represents the interests of the asset based finance industry in the UK and Ireland. Members range from subsidiaries of major international banks to small independent finance providers. The ABFA provides a variety of services to UK and Irish members, including on-line services, educational courses, lobbying, PR, and educational and networking events. The ABFA is a source of information and reference for those businesses looking to find out more about the products and services that this industry can offer.

For more information on the ABFA, to find out more about ABFA members who might be able to help with a particular funding requirement, or for more information on invoice finance in general, visit www.abfa.org.uk or call + 44 (0) 208 332 9955.

(1) Federation of Small Business equals 4.7 million SMEs in the UK.

2.6 per cent of 4.7 million equals estimated number of firms without credit insurance - 96,820

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