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SMEs fail at first hurdle in the race for funding

27 April 2011

SME's failure to maintain both historic and forward looking information on their trading performance is harming their chances of securing funding, according to FPR Advisory LLP, the specialist restructuring, recovery and insolvency firm.

In a recent survey carried out by the firm of more than 150 professional advisers in accountancy, legal and financial organisations, 60% reported that less than half of their SME clients produced regular management information on their trading performance.

Commenting on the results, Simon Glyn, partner at FRP Advisory said: "This is really concerning - not only does it mean that businesses are struggling to track their own performance, but in an environment where securing funding requires solid trading and forecast data, SMEs are falling at the first fence. As the economy starts to improve, obtaining finance will be critical to helping these entrepreneurial businesses grow in line with demand – but without this management information, banks simply will be unable to grant funding requests."

67% of those surveyed also predicted a rise in corporate insolvencies during 2011.

Simon continues: "This lack of confidence is reflective of the latest GDP figures from the Office for National Statistics, which showed only a modest growth of 0.5%, bearing in mind that the economy shrank by 0.5% in the last quarter of 2010."

Simon concludes: "It's key that entrepreneurial businesses lacking management information do not wait until an upturn arrives to put the necessary systems in place. Otherwise, they risk not being able to move quickly enough to fund a new order or recruit extra resource – missing the opportunities for growth that the UK economic recovery is depending upon. Business failures have historically risen as we come out of recession. As such, it is imperative that businesses plan for any upturn in the economy now, which may lead to increased working capital requirements and Bank funding."

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