SMEs digging into their own cash reserves to keep their heads above water

About two-fifths of all SMEs are continuing to fund their businesses using their own cash reserves to help them get through the recession, according to new research from Aldermore Bank. The UK challenger bank found that SMEs are funding their own expansions because they do not think they will get bank approval for a finance lending.

The research by Aldermore Bank surveyed 300 different enterprises from all over the UK and found that about one-third of all SMEs are depending on their own cash in order to start future growth measures. Out of the other SMEs remaining, about 12% stated they were going to attempt to get a bank loan to fund their future growth plans.

Another 10% planned on getting a hire purchase, nine percent planned on using an overdraft, seven percent planned on invoice discounting to fund expansion, and a final four percent counted on getting funding by applying for a commercial mortgage. In addition, eight percent of business owners believe that they would use personal cash to fund growth and a last ten percent stated they simply did not have any plans to expand.

The findings by Aldermore were supported by data that was released in October by the International Trade Monitor which felt that a lack in confidence has caused more than a fifth of all SMEs to rethink the way that they get funding. Data in the past found that about 44% of alternative funding comes from asset finance, 31% comes from factoring, and a remaining 26% used their own personal savings to fund their growth.

Managing Director of Aldermore Invoice Finance, Damon Walford, stated that as cash reserves start to deplete most business owners are going to need think other ways to get funding such as through asset finance and invoice finance manipulation and management.