Just one third of SME owners expected their business to expand in the six months to the end of March, despite indicators that UK business health is improving.
The number of respondents who said in October 2012 they expected their businesses to expand dropped six points from the 39% who reported the same in April, according to Hilton-Baird Financial Services’ SME Trends Index.
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Instead, those questioned were concerned by generating and winning new business, which was the main issue for 33%, followed by managing cash flow at 18% and the rising cost of fuel and raw materials at 16%.
Over the six months prior to the survey, more businesses turned to asset finance for funding, with 21% of respondents now using hire purchase or leasing compared to 20% in April 2012. It is now the fifth most popular form of financing after business credit cards, existing cash flow, banks overdrafts and bank loans.
The fall in SME confidence comes at a time when Hilton-Baird’s business health index, calculated from factors such as profitability, turnover, operating costs and bad debts, is at its highest since the survey began in November 2010. The average level of business health has now increased every six months since April 2011.
The companies which used asset and invoice finance performed the best on the index, recording scores of 1.3 compared to 0.73 for bank overdraft users, and negative scores for those using personal credit cards or non-bank loans.
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By GlobalDataEvette Orams, managing director of Hilton-Baird, said: "It is not surprising that asset based finance users are significantly outperforming those using more generic funding methods.
"According to our survey, respondents currently benefiting from such solutions, which include factoring and invoice discounting, were most able to increase turnover, profitability and headcount. Additionally, they were the most optimistic in terms of their outlook for the next six months."
