Against the background of the political storm whipped up by the shadow chancellor’s call for a temporary emergency cut in VAT, new research has emerged that suggests the difficult business banking climate is making more than just financial management a challenge for SMEs.
Opinion is split over whether a cut in VAT would provide a boost to the economy, but reading the comment generated from his announcement last week, it seems that many believe that, while relief is required, Balls has chosen the wrong vehicle.
Small businesses are among those keen to see more help from the government and a new report from the entrepreneurial management consultancy Andrum suggests that the struggle to maintain cash flow is causing more problems than in just balancing the books. According to the report, a lack of investment means that many of the new ideas hatched by small businesses never leave the drawing board. The report also points to businesses’ failure to allocate enough time or talent to develop ideas to a stage where they become attractive to investors.
Andrum is clearly stirring up debate, but it does raise a good point about small business finance. If business investment from the big banks is floundering, then perhaps a better solution lies in greater use of alternative SME business finance products. The flexibility of invoice discounting and factoring and leasing and asset finance, for example, could provide SMEs with the breathing space to make more of their ideas and to better position themselves to attract larger-scale investment from more traditional sources, should it be required.
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