SME Business News

After cutting operating costs to the bare minimum, many smaller firms are hiring sales staff, improving their websites and boosting marketing activities in an effort to tackle tough trading conditions.

Research carried out by the FPB also found that business owners expect their efforts will pay off. More than half (56%) of those surveyed expect to increase their turnover in 2010 and 44% believe their business will grow.

The findings are the first of the FPB’s new ‘Economy Watch’ panel – a body of more than 350 members who are sharing their experiences as the economy heads away from recession.

The panel is designed to provide an accurate and timely reflection of what small businesses are experiencing on the ground. Its findings will be released on a monthly basis.

The results of the first Economy Watch panel paint a generally positive picture, with firms expressing a defiant attitude to the downturn and only 13% concentrating on cutting costs. Perhaps surprisingly, 80% of those surveyed described the cost of borrowing as ‘affordable’.

However, business owners expect to see continuing tough times ahead. A significant 60% of those surveyed expect to see the general cost of business to increase this year and an overwhelming 76% are anticipating tax increases.

Additionally, almost half (48%) of those surveyed had been required to provide personal guarantees for loans, while 26% had to secure loans, often on properties, in order to access affordable interest rates. Some members reported interest rates of more than 20% for unsecured borrowing.

Commenting on the results, the FPB’s Research Manager, Thomas Parry, said: “These findings are quite encouraging and show there’s a healthy amount of fighting spirit among smaller firms.

“We appear to be seeing an upturn in confidence among SMEs and, by investing in sales and marketing strategies, small business owners are showing determination and entrepreneurial flair.

“However, much of this optimism is based on the hope of a recovering economy and increased business and consumer confidence.

“Political, economic and currency stability are all important too, with a proportion of businesses suffering from the weak pound. Also, the difficulty for businesses in terms of planning is indicated by the fact that almost one in five businesses are uncertain about the support they may want in the next month.”

Mr Parry added: “Businesses currently have a relatively high level of debt, but the low base rate has made the cost of finance relatively affordable, with 80% of the firms we surveyed stating that it was affordable. However, even those who felt it was affordable were concerned that when economic growth becomes more sustainable, the cost of borrowing is likely to increase.”

The FSB has discovered that 48 per cent of business sectors have seen a rise in the level of flat rate VAT they pay

The Federation of Small Businesses (FSB) has discovered that the flat rate VAT charged by HMRC to the smallest of businesses has risen to a higher level and the FSB has urged the Government to review the issue in its Budget submission to the Chancellor this week.

Flat rate VAT is charged to the smallest businesses with a turnover of less than £150,000 and aims to minimise the red tape around administering VAT providing a slightly lower rate which varies dependent on the sector the business operates in. In its Budget submission, sent to the Treasury this week, the FSB has called for the flat rate VAT to be immediately reviewed.

John Wright, National Chairman of the Federation of Small Businesses, said:

“When VAT was lowered in December 2008 many rates stayed the same and some were reduced by up to 2.5 per cent. What has become apparent is that after VAT was put back to 17.5 per cent in January this year, nearly half of the flat rate schemes have seen the VAT level rise above the pre-decrease level.

“While a few sectors have seen a decrease, the majority of businesses will see their rates rise, which is unacceptable at a time when cash-flow is limited. The FSB believes that this is a stealth tax, which will affect a firms overall profitability, deliberately directed at small businesses during the recession. The FSB believes there needs to be more openness in how these rates are calculated and when they rise.

“The Budget is the Governments chance to put flat rates back to 2008-levels and remove the additional tax burden imposed on small businesses.”

Current economic conditions are having a significant impact on the availability of capital, resulting in traditional financiers changing their approach to risk and tightening their lending conditions. Consequently, SMEs are finding it increasingly difficult to access the finance they need.

In response to these challenges, SME Invoice Finance is delighted to announce that it is now accredited to lend to companies under the Government’s Enterprise Finance Guarantee (”EFG”) scheme. The EFG is a Government loan guarantee for up to 75% of the business loan and through SME Invoice Finance, UK owner managed businesses can gain immediate access to working capital through factoring, invoice discounting and asset-based-lending.

Facilities offered by SME Invoice Finance under The Enterprise Finance Guarantee will support business growth and development in cases where a sound proposition might otherwise be declined due to a lack of security. It will be available nationally, delivered across all SME Invoice Finance’s regional offices.

John Wilde, sales & marketing director of SME Invoice Finance comments: “As an independent invoice finance provider dedicated exclusively to supporting owner-managed business in the UK, we want to embrace and support the recent extension to the EFG scheme as fully as we can and we are committed to ensuring that eligible companies who are entitled to benefit under the scheme are given every chance to receive the funding which they need to survive and prosper.”

Minister for trade, investment and small business, Lord Davies, believes that EFG represents a major boost to the SME community and to the economy as a whole: “The Enterprise Finance Guarantee has been welcomed by business and, following its recent extension, it will continue to play a vital role in encouraging enterprise and investment and driving productivity and growth throughout the UK economy.”

For more information on the Enterprise Finance Guarantee scheme and how it can benefit your clients, please contact John Wilde on 01483 531100.

SME Invoice Finance, leading specialist invoice discounting company for smaller businesses, is delighted to announce its 10th Anniversary of delivering much needed finance to the owner managed business community.

Ten years ago, SME Invoice Finance saw a gap in the market to offer invoice discounting to Small and Medium Enterprises. Today, after two successful major acquisitions, the company offers a comprehensive factoring, invoice discounting and asset-based lending service.

John Wilde, sales & marketing director comments: “It really doesn’t feel like 10 years ago since we started. We are proud of the fact that we have built a quality business that reflects the culture, values and ideals that we had at the outset. In large part, this is due to the strength of the team that we have managed to build and retain. We have a number of staff who are approaching 10 years of service and this has enabled us to consistently deliver to our loyal client base.”

He continues “The original concept of championing the owner managed segment is still at the heart of everything we do and we pride ourselves on delivering a valuable service, improving cash flow and enabling our clients to grow in the tough times as well as the good. Our ambition is to continue to drive the development of asset-based lending for the owner managed market. Just as we recognised the demand for invoice discounting 10 years ago, we now see the opportunity to facilitate small ticket structured lending, optimising the availability of cash flow and working capital for SMEs.”

Banks that have received bail-out support from the government are still unwilling to lend money to businesses, a House of Commons committee has claimed.

According to the Public Accounts Committee, government ownership of some banks has still not resulted in improved rates of lending to small firms.

Despite commitments made under the terms of the Asset Protection Scheme, which saw billions used to support bank balance sheets against credit crunch toxic debts, to boost the levels of lending to businesses, the Committee report suggested that not enough credit is being offered firms.

Edward Leigh MP, the chairman of the Committee, said: “The Treasury does not seem to know why the banks are not lending and has few sanctions available to make them change their minds.”

Once new lending commitments are set up in the next financial year, the Committee recommended that the Treasury employ a more exact measure of changes in lending trends to introduce “effective and enforceable sanctions if the banks continue to fall short of their commitments”.

The banks maintain that lending has increased but that the rise in borrowing has been more than offset by businesses keen to pay down their existing loans.

The Federation of Small Businesses (FSB) highlighted last year that one in four of its members continue to find it difficult to secure affordable credit.

The Treasury has already taken steps to oblige lenders to produce a consumer charter that clarifies whether more stringent terms and conditions are not dampening demand for business credit. However, the results of implementing the charter will not be fully known until the banks publish their lending results for the first quarter of the year.

Small businesses could make significant savings through the use of mobile broadband, according to a new report.

The report, based on a study by telecoms and media analyst company Analysys Mason, shows that UK small businesses could save over two thousand pounds per year by choosing mobile broadband over WiFi hotspots.

The figures showed that small businesses employees could be racking up WiFi bills of up to £700 each every year, while mobile broadband costs less than £10 per month.

Steve Hilton, Principle Analyst with Analysys Mason and author of the report pointed out that while mobile broadband may be slightly slower than WiFi hotspots, it provides better coverage and reliability in most areas.

He added: “Seemingly small technology expenses incurred by many employees add up quickly. Taking advantage of simple technology solutions, such as mobile broadband, with payback periods of six months is a sound business practice.”

As the debate continues as to whether Britain is still in recession, there is no doubt that the lion’s share of job creation will come from SMEs.

Piers Linney, chief executive of Outsourcery, which supplies 10,000 SMEs with IT solutions, notes “We have a large customer base of SMEs and we are well aware of the difficulties that many have faced over the last 18 months. In some cases our customers and suppliers or partners have failed, which impacts our business. As we have customers in almost all sectors, we have seen some suffer more than others.

The SME experience of the recession varies greatly depending on the sector, capitalisation, investment and protective actions taken. A number of partners reliant on sales funded by hire purchase agreements were directly impacted by the credit crunch, but even those business models have evolved to recover.

The need to reduce costs and to maximise productivity has been a positive outcome and those customers and business partners that have trimmed their cost base and continued investment, have come through the recession well placed to grow market share. Technology such as cloud computing is providing help to many by doing away with thousands of pounds of costly IT investment in favour of pay-as-you go IT delivered over the cloud for as little as GBP6 a month, enabling many SMEs to continue trading in these tough times.”

Cloud computing technology - where software and hardware is pooled centrally and made available over the internet - is enabling small and medium-sized businesses across the UK to reduce costs and enhance efficiencies.

With the UK looking to SMEs to pull it out of recession, it is critical that this important sector finds ways of not only surviving, but growing. In 2009 as a whole, there were 19,077 company liquidations, up 22.8 percent compared with the previous year, and 134,142 people were declared insolvent, around 1 in every 320 adults, up 25.9 percent from 2008.

Small and medium-sized manufacturers are starting to benefit from the relative weakness of Sterling, with overseas orders stabilising after seven quarters of decline, according to the CBI. Manufacturing production also steadied, but is expected to fall in the next quarter as overall demand remains weak.

Of the 418 firms surveyed for the CBI’s quarterly SME Trends Survey, 27% said the volume of export orders rose in the three months to January, while 25% said it fell. The resulting balance of +2% is the strongest figure since January 2008 (+12%).

Export orders are expected to grow more strongly in the next quarter (a balance of +8%), and firms are the most optimistic about export prospects for the year ahead since October 1995 (+15%).

Domestic orders continued to decline, but at the slowest rate since April 2008 (-10%). 23% of firms reported a rise in orders during the past three months, and 33% a fall, giving a balance of -10%. Firms expect domestic orders to fall again in the next quarter (-7%). The volume of total new orders fell in the past three months (-5%), but at a slower rate than the previous quarter (-17%).

Manufacturing production stabilised in the quarter, thanks in part to the modest improvement in exports. 27% of SMEs said output rose and 26% said it fell. The resulting balance of +1%, was above expectations, and the highest since April 2008 (+2%). But output is predicted to weaken in the coming months (a balance of -6%), as total new orders are expected to fall further (-4%).

Russel Griggs, Chairman of the CBI’s SME Council, said: “Smaller manufacturers have been pinning their hopes on the relative weakness of Sterling to boost overseas orders and offset weak demand at home. It is therefore encouraging that exports are now stabilising.

“Small and medium-sized manufacturers are also expecting overseas orders to grow in the coming months, and are the most upbeat about export prospects for fifteen years.

“However, with the economy only just edging out of recession, conditions will still feel pretty challenging for smaller firms. Domestic orders are likely to remain depressed, and firms are expecting output to fall in the next three months.”

Optimism about general business prospects was broadly unchanged (+2%), compared to +9% in the previous quarter. Close to 10% of small and medium-sized manufacturers are reporting that credit or finance constraints are likely to limit output or export orders in the next quarter. Smaller manufacturers are continuing to reduce their headcount (a balance of -8%), albeit at a slightly weaker rate than the previous quarter (-12%). Firms are continuing to de-stock, but at a slower rate, and 66% of firms are working below capacity.

Small business start ups are relying more and more on help from their family and friends, according to new research. In fact, more than half of those businesses surveyed by CreditPal said their family and friends were the most supportive group when it came to setting up their business.

Jill Pincott, a small business owner, explained: “We never asked anything from my family, but they were always there being quietly supportive in the background. For us, one of the most helpful things was talking to other small businesses that had been through the process. Government agencies can be useful, but I think they should provide more face-to-face meetings.”

Many small business owners flagged similar concerns about a lack of support from government agencies, the survey also revealing that just 4 per cent of respondents cited them as being the most supportive when setting up a new business. Furthermore, only 6 per cent said their bank was the most helpful.

Perhaps most shockingly, the survey also found that 31 per cent of the small businesses who took part said they were unable to obtain any support when starting their business.

Dragon’s Den star James Caan is set to launch a london-based academy for entrepreneurs.
The school, which follows hot on the heels of Peter Jones’ National Enterprise Academy, will provide general training for those starting out in their own business.
Caan said that a major challenge facing new small business owners is the lack of experience. “The problem with being the boss is you have no-one guiding you. Asking businessman friends seems like defeat and you don’t want to admit you’re a novice. But everyone needs a helping hand.”
The Academy will officially launch on March 20th, with a special one-day seminar. Discount ‘early bird’ tickets are available from the Academy website.