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PayPal’s new SME lending scheme

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29th Aug 2014
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For small businesses in the UK, the launch of the PayPal Working Capital Fund can only be a good thing, says Rich Preece of Intuit.

Since going live in North America last year, the scheme has boosted SME finances to the tune of US$140m and with this UK launch, it will start to provide similar opportunities to UK SMEs that are struggling to find funding. This is mainly because the fund lends to businesses without having to run a credit check, nullifying one of the major reasons why many smaller organisations struggle to get finance.  

This is a coup for small and medium-sized businesses, but owners will need to weigh up the pros and cons of different finance routes before deciding whether this fund is right for them. They don't need to do this alone and finance professionals are in prime position to help. In fact recent Intuit QuickBooks research found that more than two thirds of small businesses expect their accountants to provide strategic business advice, as well as their standard bookkeeping services. Accounting professionals should be prepared to consult SMEs in areas such as funding and support them through the process.

The bottom line is that private initiatives such as Paypal’s Working Capital Fund and government schemes such as the Funding for Lending, Enterprise Finance Guarantee and British Business Bank are giving small and medium-sized businesses necessary alternative routes to finance. They are needed because banks are still reluctant to part with their cash. In the short-term, these schemes are designed to encourage more start-ups and help a number of small businesses grow as this gives them that all important cash injection. They also increase competition for lending in the private sector. Along with schemes such as Business Banking Insight which allows SMEs to rate their experience of banks, these measures encourage both banks and companies to provide a better service to SMEs to enable growth. 

Regardless of the route chosen, it’s critical to impress on SMEs that managing finances (from invoicing to cash flow) is very much an ongoing process and it plays a crucial role in determining whether a business succeeds or fails. This managing of finances not only requires the right support from third parties, but also the right technology. For example, paper-based records and Excel spreadsheets should be a thing of the past, as small businesses embrace the digital age and new ways of working.

By managing their finances online, businesses and accountants can prosper regardless of the current banking situation and keep their bank balance firmly in the green. 

Rich Preece is VP and managing director of Intuit UK.

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