With 2014 forecast to be one of the best for the UK economy in several years, a survey of SMEs has found that just a third are looking for external funds to finance their growth plans, with nearly half preferring to spend their own cash.
A poll of 165 SMEs conducted by KPMG has found that 46% of businesses plan to draw on their own cash reserves in order to finance their growth plans, with just 21% claiming they will need to raise funds outside of the business.
Commenting on the findings, Iain Moffatt Head of Regions at KPMG said: “Despite 90% of businesses feeling confident that they will achieve some growth this year, there is still a great level of caution with many businesses unable to forget the lessons learned in the recession and continuing to be risk averse.
“Nearly half of businesses are not willing to take on any risk associated with external finance and leverage their business, despite the reported optimism levels. This is an indication that companies are still very uncertain about the banking market, which some view as being unsupportive to small businesses during the recession.
“SMEs are not entirely convinced that the economy is out of the woods yet with two-thirds claiming that ultimately the economic conditions would be the biggest impediment to their growth. If the economy doesn’t do as well as predicted or interest rates go up too early, the risk of potential insolvency will be heightened if the majority of businesses intend to fund growth from their own resources.”
The survey found that 75% of SMEs are more confident about their prospects in 2014 than the previous 12 months with a fifth of respondents claiming international expansion would be the most critical element in moving their growth agenda forward.
Interestingly, when asked how they as a business measure growth, 32% of respondents attributed it to an increase in revenue, which could lead to the risk of overtrading as the economy improves, as businesses take on more orders than its cash resources can fulfill.
Iain Moffatt concluded: “Businesses with strong management teams that have navigated 5 years of recession and insipid growth will have considered themselves successful in surviving until now. With the prospects of better conditions returning the outlook will be brighter but there is a need to keep close control on cash, accurate cash-flow forecasting and the need for continued monitoring of the cost base.”
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Notes to Editors
Surveying was conducted during December 2013 in the South East, Scotland and north of England with 165 businesses from the SME sector.
PR Manager, KPMG
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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.