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14 August 2013updated 22 Oct 2020 3:55pm

Why small businesses face a perfect storm

Tips for getting out alive.

By Economia

Managing cashflow effectively has always been critical to a burgeoning business’s ability to become established and grow, though right now in particular, it’s an area that owners and financial controllers need to keep a very keen eye on.

This is because SMEs currently find themselves in the midst of a perfect storm. At one end, more stringent capitalisation requirements in the wake of the Basel III Accord and the generally uncertain economic outlook has seen banks reign in their lending to small and medium sized businesses. A recent BBA study found that last year, lending by banks to SMEs fell in 80 per cent of UK postcodes. At the same time, large corporations are taking longer to pay their suppliers, taking advantage of the hugely dominant position they hold in a relationship that, even in the times of plenty, was never one of equals. The unfortunate result is that at a time when our economy desperately needs SMEs to breathe life into it, their ambition and desire to drive the recovery is being stifled, with many of them left gasping for air as they suffer from a squeeze in all directions.

There are however some simple, yet effective steps that SMEs can take to help them navigate what is unquestionably a difficult time when it comes to keeping their enterprises cash-healthy, functioning smoothly and primed for growth.

If the cash balance of the business is good, securing a credit line now could be an SME’s smartest move. Credit is always easier to secure when you’re in a position of strength, and taking advantage of this upper hand to boost your cash flow – at cheaper rates and in quicker time than if things were tight – is a savvy maneuver. Things can change quickly, particularly in the economic-age we’re operating in at the moment, and having ample funding in place can help ambitious businesses shock-proof their growth plans before adversity strikes.

Anil Stocker is the co-founder of MarketInvoice.com.

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This rest of this piece can be read on economia