Alternative funding is available

SMEs urged to unlock assets as unpaid bills rise

Bank of Scotland branchScottish SMEs are owed an average of £79,070 in outstanding invoices – a rise of more than 59% in two years – but they are also failing to unlock assets to fund growth.

Bank of Scotland’s Business in Britain research says unpaid bills are likely to grow this year with 32% of small businesses expecting more of their customers to demand deferred payment terms.

But it also found that Scottish businesses also own an average of almost £489,185 of assets and the bank says this could be used to fund further growth.

This sum represents a huge 236% increase on 2014, when Bank of Scotland found that SMEs owned an average of £145,518 in assets.

Together, the figures suggest that a lack of understanding of alternative funding options is holding Scottish SMEs back, says the bank.

Colin Walls, head of trade and working capital at the bank, said: “36% of businesses in Scotland told us that late payments were affecting their cashflow, and with the amount of money owed to them in unpaid invoices, it’s not surprising.

“Yet having this volume of unpaid invoices –  as with cash tied up in physical assets – needn’t prevent firms from having sufficient working capital to invest in growth.

“Different types of funding such as invoice finance or asset-based lending can help unlock the working capital that they need, allowing businesses to grasp more of the opportunities that exist at the moment.

“Failing to take advantage of these types of funding, on the other hand, could be seriously holding them back, affecting not only their growth, but for many firms, potentially stunting the the growth of the entire supply chain beneath them.”

The research also found:

·         Almost one in eight (12%) SMEs admit to having cashflow problems (2014: 15%)

·         Over a third (36%) said that late payment was the biggest cause of cashflow difficulties. A further 18% blamed fall in demand or lack of business.

·         Almost a quarter of businesses (24%) are owed £200,000 (2014: 6%)

Mr Walls added: “Unless businesses in Scotland look at ways to unlock the value tied up in these assets, both they and the UK economy overall are likely to be held back.”

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