SMEs relying on friends and family for survival

The research revealed that a quarter of businesses do not use external finance at all, while 13 percent turn to bank loans, seven percent to invoice finance, seven percent to unsecured personal finance such as credit cards and one percent to peer-to-peer lending or crowdfunding.

Often one of the primary concerns for businesses is low cash reserves and given that SMEs are the lifeblood of a healthy economy, providing access to alternative sources of funding could be the solution needed to create new jobs and boost the prosperity of the entire country.

For example, cash-free trading methods, like business-to-business bartering, have been growing steadily with an estimated 85 per cent of the world’s fortune 500 companies even operating their own in-house departments. In the UK, bartering is in a healthy state, with the total amount traded each year firmly into eight figures. It is proven as an alternative source of ‘cash-free’ finance – something especially attractive for businesses – and is enabling businesses to preserve cash and reduce traditional borrowing, therefore reducing the dependence on cash and the banking sector.

A significant factor in the growth of barter has been the development of trade exchanges. They provide transactional security and a record keeping facility that aids transactions and provides a firm platform for their members. In addition the trade exchange consists of a vast network of businesses that want to trade with each other. This gives members a huge advantage over their competitors who are not part of the growing barter community. These trade exchanges have been at the forefront of technology and innovation allowing transactions to be processed online and even with new mobile applications as well as traditional vouchers.

Today, it is possible to buy and sell almost anything on barter – companies use the service to cut their costs by sourcing everything from IT to business cards through a barter network. Bartering is also a very efficient means of utilising spare or idle capacity. For example, filling empty tables in a restaurant or vacant rooms in a hotel. Not only does this deliver revenue that would have otherwise have been lost but means the business does not have to resort to heavy discounting or special offers. Whatever the state of the economy, it is always better to pay for things that your business needs with your own products or services rather than using cash.

Brian Whitford, Head of Marketing at Bartercard UK commented, “We couldn’t agree more with David Postings comments regarding the need for Government to educate SMEs about the funding opportunities available to them. The statistics from Bibby’s quarterly SME Tracker survey only serve to further emphasise the importance in doing this and quickly.

All too often, businesses rely on traditional forms of lending which, as the research reveals, is a restrictive source of funding that is unsustainable. By relying on traditional lending from the banks, SMEs are restricting their chances for success and missing out on a huge opportunity to drive their business without dipping into personal savings, borrowing from friends or family or relying on overdrafts – all of which can damage relationships and result in grave financial circumstances.”

With clear evidence supporting the case for non-traditional lending, there should be no hesitation from the government to inform and educate business owners on the alternative sources for financial support. By looking outside of traditional bank loan models and taking advantage of schemes, like bartering, they could be helping to preserve cash and improve the profitability of SMEs in the UK resulting in a more buoyant and flourishing economy.