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Scottish SMEs Reluctant to Seek External Funding

Small business sentiment surveys are all the rage in the alternative finance space – and now some telling insight has emerged about SME attitudes in Scotland.

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With the referendum just around the corner, and the role of alternative finance providers in an independent Scotland unclear – a new report on Scottish SMEs suggests that they’re not currently considering the full spectrum of funding options on offer. According to the survey – which was conducted by Bibby Financial Services – 9 in 10 Scottish SMEs are not looking for external funding in the near future, in spite of the fact that over half (54%) are planning investments into their businesses over the next few months. 72% of the business owners planning such investments indicated that they will be using their own money to fund the operation.

Why is this happening? Alan Anderson, Head of Sales at Bibby Financial Services Scotland, wondered the same thing:

“Our research begs the question of why Scottish SMEs are not proactively seeking alternative forms of finance and shopping around for the best deals – particularly when so many are planning to invest in equipment and recruitment over the coming months.

“The danger is that SMEs could actually be inhibiting their growth prospects and stifling jobs creation in the future by failing to investigate external finance now.”

Bibby is an alternative invoice finance provider – but not in the mould of a MarketInvoice or a Platform Black. The business uses its own balance sheet to fund SME receivables. Bibby’s research suggests that 79% of the Scottish SMEs that do seek external investment go straight for traditional bank loans and overdrafts. Anderson is now calling on financial advisors to play a more significant role in turning the attentions of Scottish business-owners to the alternative finance scene:

“With 58 per cent of Scottish owners and managers relying heavily on their accountants for business advice, it is clear that these professionals have a crucial role to play in helping businesses with key decisions such as how to structure their finances and fund their growth.

“The traditional banking model is no longer able to meet the complex and varied funding requirements of growing SMEs. It’s vital that owners shop around and ensure they have the information they need to make the most suitable funding decision for their business - and that they can take advantage of the benefits of alternative, non-bank finance.”

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