In times of apparent doom and gloom for many SMEs across the UK, with many reports indicating that bank lending is still extremely difficult to secure, it may surprise many that just under half of SMEs in the UK are sitting on an average of £190,000 investible cash. According to recent research from Venture Finance and Investec Bank, 47% of SMEs have some cash reserves, but most (61%) are too afraid to use this money for anything other than a safety-net in these times on instability.
Peter Ewen, Managing Director at Venture Finance has encouraged SMEs to resist their saving mentality and to start investing to push the UK out of the current unstable climate. Mr Ewen said "SMEs need to put their heads above the parapet and start exploring their business and financial option." He went on to say "If SMEs can shake off this cautious mood and grasp the increasing growth opportunities available, it could be a great boost for them and for the UK economy.”
Peter Ewen has further suggested that the current mentality of SMEs could do more harm than good for the UK economy saying "this could become a vicious cycle, sending everyone back into the doldrums”.
Furthermore, it has been found that 31% of SMEs have no plans to grow and 28% have confirmed they will not be investing in their own growth over the next 12 months.
As an advisor to SMEs across the North West, a cautious approach is entirely understandable, especially where the company has a small number of larger clients. However, existing cash reserves can be a useful and cost effective way of investing in the growth of the company without jeopardising its viability or having to jump through the hoops required to obtain further bank funding or funding from external investors.
For a discussion of your business' finances and growth plans, or to obtain specialist SME legal advice, please don't hesitate to contact me.