Leaping The Hurdles

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Debbie Bell, Regional Sales Director at ABN AMRO Commercial Finance, examines the fear holding businesses back from seeking finance. 

There has been a lot of discussion lately around the availability (or lack) of business finance. It is increasingly clear that companies are not seeking finance in the volumes one might anticipate in troubled economic times, but is this a demand or a supply issue? 

The Ernst & Young Item Club’s April report added to the growing pool of evidence suggesting that many companies actually have cash but are not investing it. It suggested that companies are sitting on a collective £750bn of investable reserves, equivalent to half of the UK’s GDP. 

These findings echo research we conducted late last year, which showed that businesses were reserving their cash as a ‘buffer’ to protect themselves from future problems, stating that the economy was too uncertain to allow them to invest in growth. 

Yet, much of this worry is based on perceived danger rather than real, impending financial difficulty.

The fear factor

For most business owners, the main concern is the day-to-day running of the company. When it comes to finance, the instinct can be to bury their heads in the sand and carry on as usual but this clearly isn’t the best approach. When finances become too stretched, the smallest change can have a significant effect.

For many, approaching their existing financier and asking for additional finance can be a daunting prospect. What if the lender deems the need for additional finance as a negative and reduces, rather than expands, existing facilities? Our experience is that most SMEs would rather keep a low profile rather than risk upsetting the apple cart.

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