Study finds firms using other funding models faring less
well.
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UK
businesses using asset financing are faring better than those using
other funding models, industry research shows.
The latest ‘business health index’
from commercial finance broker Hilton-Baird Financial Solutions
gave companies using asset financing a score of 0.70 compared to
0.35 overall.
The twice-yearly survey, which uses
a range of factors including bad debt levels, tax arrears, turnover
and profitability to calculate the financial robustness of UK
firms, showed a drop in overall health, down from 0.49 recorded
last November.
It is not all good news for asset
finance users though, as the general health of companies using the
funding model has also fallen from 0.86 in November.
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By GlobalDataBusinesses using invoice financing
also fared better this time, compared with the overall index,
scoring 0.62 whereas firms using credit cards and/or family and
friends (0.23) and bank overdrafts (-0.05) to fund their business
fared worse.
Evette Orams, managing director of
Hilton-Baird Financial Solutions, said this strength is because of
the flexible and targeted cash flow support asset and invoice
finance can provide.
Despite economic growth in the
first quarter of 2011, a combination of government spending cuts,
the VAT rise and severe weather at the end of 2010 have led to an
overall decline in the health of SMEs, she said.
Orams added: “The fact that invoice
finance and asset finance users are once again financially stronger
than those using more traditional forms of finance demonstrates the
benefits such targeted funding can provide.
“We urge businesses to ensure they
have the right funding in place to assist with their business’
strategy.”
To produce the index Hilton-Baird
questioned 576 business owners between March and April 2011 about
their business’ finances and growth prospects.
Of those questioned 76% reported a rise in operating costs
during the preceding six months and only 58% won new contracts,
causing the overall index to fall from the previous survey.
