pixstock - Fotolia

A surprising number of SMEs blamed a lack of finance for stalling growth

Revelations that a lack of finance is holding back some SMEs surprised Billy MacInnes in terms of the volume of firms expressing problems

I was interested to receive a (brief) press release recently which stated that almost a third of SMEs in the IT sector had missed out on business opportunities due to lack of finance in the past 12 months.

I can’t say that I was shocked by that information. If anything, I was surprised that it wasn’t higher. In a struggling market, for instance, SMEs are likely to face difficulties obtaining finance because credit providers are going to be extra cautious. In a growing market, they could face constraints because their past financial performance doesn’t match the requirements from credit providers to provide increased credit.

According to the survey of more than 1,000 senior business decision-makers across the UK by Aldermore, “a specialist bank offering straightforward products” to SMEs, those missed opportunities are costing IT SMEs an average of £95,800 per year.

Now, I have to admit at being surprised by that figure, as art first sight that seems quite high. I suppose it depends on the size of SME. At the lower end of the scale, that could be as much as a quarter or a tenth of overall turnover. According to Aldermore, the survey was of business decision-makers in companies of up to 250 employees, so perhaps that’s not such a big figure in the scheme of things.

In any case, how do they calculate the value of missed business opportunities? If SMEs have self-identified those missed opportunities could they have, possibly, inflated their value? Or could they have blamed credit availability (or lack thereof) for missing out on business opportunities which, in fact, they failed to secure for other reasons?

Anyway it’s hard not to agree with Carl D’Ammassa, group managing director for business finance at Aldermore, when he says that a lack of finance is acting as a brake on SME growth.

“With two fifths of SMEs operating in the IT/computing sector saying that their key business priority for 2017 is achieving growth, it is frustrating to see that so many firms are missing out on business opportunities due to a lack of appropriate funding,” he states. “In our experience, UK SMEs have retained their ambitions to grow despite the uncertain economic environment, so it is vital that the finance industry gives them every chance to succeed.”

You have to admire the optimism and resilience of UK SMEs but those three words – “uncertain economic environment” – aren’t exactly guaranteed to get the credit flowing freely. Nor are they likely to convince finance providers to give SMEs every chance to succeed. Even if they do, it’s likely to be at a potentially greater risk, which means a higher credit cost or lower amounts of credit.

Given that “uncertain economic environment” is a pretty accurate description of the state of the UK for the next few years as the negotiations over Brexit and the consequences of leaving the EU reverberate (and we haven’t even mentioned Scottish independence), it may well be that SMEs will find their growth plans hindered by “a lack of appropriate funding” for some time to come.

Read more on Finance and Credit