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UK firms suffer as overdrafts are cut

ONE in ten businesses in the UK have had their overdraft cut in the last 12 months a new survey has revealed.

Of the firms that had their overdraft cut, over a third claimed that the reduction has slowed their business down, while a further 20 per cent revealed that the cuts have stifled their plans for growth.

These figures come from the latest Close Brothers Business Barometer, a survey that canvasses the opinion of SME owners from a variety of sectors across the UK on a range of economic and financial issues.

CEO of Close Brothers Asset Finance, Mike Randall said: “Overdrafts often provide an essential lifeline for SMEs. Many have experienced difficulty in accessing finance from their banks in recent years and are relying on overdrafts alone to fill the cash flow stopgap.

“While this strategy may be sufficient in the short term, it’s risky as banks may not be able to guarantee consistent funding. The reality is that SMEs may struggle to sustain operations in the short term with even a minimal reduction in the finance they have at their disposal.”

The Business Barometer also revealed that over half of UK businesses polled would not consider using asset finance as a means of helping their cash flow. One of the main reasons cited was lack of understanding of the products.

Mr Randall said: “Given the situation with overdrafts it is a concern that many businesses are still unaware of all the funding options available to them or don’t feel that they are sufficiently knowledgeable about the range of products on offer. As many as a quarter said they would not consider refinancing in any form as they are worried about risking their existing assets.”

He added; “We encourage businesses to look beyond the short-term and seek adequate, stable funding that will help ensure their long-term success while relieving the pressure on cash flow.

“Firms often have cash ‘hidden’ in their companies’ assets and products like refinancing or Sale and HP Back can be a real lifeline. You can release capital back into your business quickly, giving you an immediate boost to cash flow while you continue to use the asset without interruption.”