"Many SMEs need finance at some stage and it can be a time consuming exercise to find the right funding source."
There has been a sharp increase in SMEs looking to borrow money to finance growth in the first half of 2019, according to a report by the BVA BDRC SME Finance Monitor.
The report shows that almost half (46%) of SMEs were using external finance in the first six months of 2019, up from 36% in 2018. The largest increase in business finance was for overdrafts, up from 19% in 2018 to 23% in the first half of 2019, followed by credit cards, rising from 14% to 19%.
This has led to the proportion of businesses using finance (46%) now exceeding the proportion that are not (41%), which is the first time this has happened since 2014.
Michael Foote, managing director of Quote Goat, commented: “Many SMEs need finance at some stage and it can be a time consuming exercise to find the right funding source.
“Many are relying on overdrafts, as they appear to be the easiest option, but they can come with high interest rates, so it’s certainly worth shopping around.
“There are now a variety of lending options that are more tailored to the specific needs of borrowers. Merchant cash advances, for example, are calculated as a percentage of a business’s daily card takings and automatically repaid. Invoice finance is another form of lending that can quickly increase business cash flow using the value of your unpaid invoices as security for the lender.
“A merchant cash advance is a relatively new type of unsecured lending and, unlike a typical business loan, there is no interest charged and repayments are based on a percentage of the card machine sales each day. This helps to ensure that repayments stay in line with cash flow, during both busy and quiet periods throughout the year. The amount to be paid back is based solely on the card receipts and not on cash takings.
“Merchant cash advances have been praised by the government as an alternative funding option for UK businesses and they have already helped thousands of small business owners secure the funding they need for new expansion, equipment and more."