The Growth Blog

Why finance can awaken the UK’s SME giant

Dec 14, 2018 9:37:49 AM / by inFund

The UK small business sector has been referred to as a sleeping giant and with access to finance we can awaken that giant.

awaken the giant

However, whilst a few years ago it would have been difficult for SMEs to access finance. This is no longer really the case. Alternative finance providers have started to plug the gap.

If an SME needs access to finance to fund business growth, there are options available to them.

So what is really keeping the giant asleep?

  • A fear of debt
  • A lack of awareness of finance options
  • Belief to scale their business

And the result is a lack of financing ambition.

Without that ambition how are businesses supposed to innovate? Whether it’s investing in recruiting talent, developing new products, enhancing services, expanding/moving premises… it all requires funding.

Yet finance often gets tarnished with a negative brush. ‘It’s for poor performing businesses’, ‘it’s too risky to take on the debt’, ‘we have no need for finance’. The issue is finance is being put in the wrong box. It shouldn’t just be used when times are tough, that’s too short term thinking.

Using finance should be part of a long term growth strategy. Goldman Sachs 10,000 Small Business programme has shown that when small businesses have access to financial education and support, they respond! After graduation, 70% of small businesses take on finance compared to the 17% average in the UK.

So the question is what are small businesses learning from this programme that has such a transformational impact?

Well the answer is simple, they come away with knowledge and confidence. There are expert and experienced professionals in their corner, telling them they have a sustainable business that with the right finance, has the potential for high growth.

We have all been there from time to time in our own personal life. Someone you know and trust gives you the reassurance that you can do more. This gives you the confidence to take that leap forward.

Knowledge and confidence has certainly paid dividends for those who graduated: "They are growing revenues at 81% a year on average, which is 13 times the national average"...

...This is how finance can awaken the sleeping giant.

Now is the time to consider how you can take your business to the next level? How can you use finance in the right way, a way that allows you to invest for growth?

3 things to consider to unlock future growth for your business


1. Firstly reflect on your previous year

Did any opportunities arise that if you had the cash, you would have jumped on? It could have been something like:

  • Purchasing stock/inventory at a reduced rate from a supplier
  • Refurbishing your premises – giving it more than just a lick of paint
  • Hiring new employees to develop new products and services that would have allowed you to maximise the surge in seasonal demand
  • Investing in technology to improve efficiency and the customer experience
  • An opportunity to open a second shop or office.
  • Launching a marketing campaign to generate demand

The point is, there would have been something that you had an opportunity to jump on. Or you may have had a growth idea, but put it on the back burner.

Sit down and map out those missed opportunities. Consider how you could learn from them and harness them in the future. What ROI could you generate from those investments? Could you perform like one of the Goldman Sachs graduates? What would 81% growth do for your business? Armed with this insight, you can explore the finance options available to you.

The best approach is to bake the repayment costs of finance in to your overall ROI calculation. If your calculation is positive, then it makes sense to source finance to grow your business.

2. Let finance fuel your ambitions

Not to sound like a broken record, but finance should be used to accelerate your growth, not just plugging short term cash flow issues.

When you think about your growth ambitions, don’t delay, by delaying you will end up missing the opportunity.

Here’s an example of how you could miss out on opportunity:

Let’s say you’re a seasonal business and you’re buying an in demand product. If your current cashflow only allows you to purchase 10,000 units and let’s say for simplicity each unit is £1, with a margin of 50p, your profit would be £5,000.

What if you could use finance to purchase 30,000 units with a margin of 35p, your profit would be £10,500.

Savvy businesses simply see finance as a cost of sale. And they recognise that by accessing finance they can invest more in whatever growth initiative they decide.

This is just one example, there are plenty.

Investing in Marketing is another great example. If you could access finance to fund a campaign to promote a new product or service, you can generate more demand. Calculate your expected ROI from the campaign and then determine what it would be with repayment of the finance. If you’re still generating a positive ROI, it makes sense to invest. The alternative is to do nothing or do it later and that’s never going to support the growth of your business.

One of our customers, The Waverley Hotel used finance to invest in expanding their services. They were able to invest in a gin a and whiskey shop and a guest house. These investments have now started to generate revenue, which has allowed them to take their business to the next level. (Read the full case study)

3. Think long term

Research by Close Brothers revealed that only 28% of SMEs plan their needs for finance a year in advance. While 64% only plan a year in advance. 8% do not engage in planning at all.

This is not sustainable and it sheds some light on why there is a reluctance to take on debt. You need to think 2,3,4 even 5 years’ time. A well structured growth plan will give you the blueprints to growing your business.

Once you have developed your ideas and plan, the next stage is to determine what funds you will need to get you there.

Final thought: If you’re going to use finance, use finance you control

So hopefully you can now see the benefits of using finance to invest in growth. However, accessing the right finance is just as crucial.

At inFund we deliver innovative finance solutions, driven by technology that puts the control in your hands. And it works like this:

  • Decisions based on you – inFund uses technology to assess your credit health in a smarter way. It’s based on real-time credit information about your business, not one-size-fits-all criteria. This means we can say yes, where others say no.

  • It’s fast and simple – Sidestep the headache of paperwork and lots of admin. There’s no long application process and no business plan needed. It’s a simple process that allows you to apply in minutes and get a quick decision.

  • A facility you control – Unlike a loan, inFund offers a flexible live credit facility. This empowers you to draw down from your confirmed capacity, the amount you need, when you need it and you only pay interest on the days you use the funds.

Our live credit facilities allow you to dip in and out, accessing funds quickly, so when you need to take advantage of growth opportunities, you can do so on your own terms.

And the great thing about our live facility is… it’s live! That means you don’t have to come back to us each time to apply for further funding. You get a real time view of your credit capacity. It’s always on and always available.

So if you want finance that’s flexible and agile like you and grows as your ambition grows, you can rely on our live credit facility.


Topics: Finance, funding growth, Investing for growth, Flexible finance, SMEgrowth


Written by inFund

inFund is a loan and credit facility provider supporting SMEs to grow and finance their ambitions.