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.
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The twice-yearly survey, which uses a range of
factors including bad debt levels, tax arrears, turnover and
profitability to calculate the financial health 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 as the general health of companies using the funding model
has also fallen from 0.86 in November.
Businesses 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, suggested this strength is
because of the flexible and targeted cash flow support asset and
invoice finance can provide.
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By GlobalDataShe said despite economic growth in Q1 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.
Orams added: “She said: “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, and 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.
grant.collinson@vrlfinancialnews.com
