More than half of entrepreneurs use bottom line cash to fund business growth compared with just one fifth that say they source development capital from the banks, a survey finds.
More than half of entrepreneurs use bottom line cash to fund business growth compared with just one fifth that say they source development capital from the banks, a survey finds.
At the same time, 42 per cent of the nearly 500 surveyed entrepreneurs from across the UK describe their attitude to cash as ‘actively stockpiling’ and are retaining cash within the business, finds the Entrepreneurship UK: 2011 report from consulting firm Deloitte.
The study finds that while six out of 10 say their bank has met most or all of their business needs over the last 12 months, a quarter say only some of their needs have been met and 12 per cent have seen virtually none.
According to the entrepreneurs, the key area to improving their relationship with their bank is for the lender to offer better loan terms – a finding that cements a Bank of England report last month that finds banks are imposing more stringent terms and conditions on loans to small and medium-sized businesses.
Almost half (48 per cent) have experienced no change in their bank’s willingness to lend or improve their lending terms, and less than a third (29 per cent) have noticed a change.
Tony Cohen, head of entrepreneurial business at Deloitte, comments, ‘Ever since the credit crunch and the subsequent financial crisis reduced financial options for businesses, entrepreneurs have been waiting impatiently for lending conditions to improve.’
Cohen adds, ‘It is telling that a large proportion of entrepreneurial businesses are still stockpiling cash and nearly a quarter are saying they do not use bank financing for the growth of their business. As a group, entrepreneurs feel better served by banks than in the last few years, though frustrations remain for a large minority.’
When asked about government-led resources, 30 per cent of entrepreneurs are unfamiliar with the Enterprise Finance Guarantee Scheme (EFGS) and 27 per cent did not know about the government’s Enterprise Zones.
In other survey results, 57 per cent of entrepreneurs report revenue growth in line with, or out-performing, their projections for the year, while 37 per cent saw their revenue fall below their ambitious forecasts, and only 16 per cent fell significantly short of their revenue targets.
Overall, optimism remains strong among entrepreneurs for a second year, with nine out of 10 expecting to grow their business in the next 12 months. While half forecast double-digit growth, down from 56 per cent last year, just 8 per cent project zero or negative growth.
The appetite for mergers and acquisitions in order to grow the business is down to 4 per cent from 6 per cent last year, and only eight per cent are considering entering into a strategic alliance or collaborative project.
