Scottish Pacific, a working capital solutions provider, has just released the first Scottish Pacific SME Growth Index which shows a majority of SMEs are forecasting positive growth in the next six months but many have insufficient knowledge of their financing options.
“The research clearly shows that a majority of SMEs are in growth mode, and have plans to introduce new products and services,” said Peter Langham, Scottish Pacific CEO.
“But many SMEs seem unaware of the funding options – such as asset-based lending (including debtor finance and trade finance) – that are available beyond the traditional secured overdraft,” he added.
Mr Langham told AccountantsDaily this presents a great opportunity for accountants to step in and help their clients achieve a better financing option.
“The thing the accountants need to be aware of is that there appears to be a propensity to go straight to the four high street banks and say 'Can you do this for me?' and probably accept whatever they give you in terms of the conditions that they may impose,” said Mr Langham.
“Maybe sometimes the accountants should get on the front foot and say 'We shouldn’t have to live with these covenants, what alternatives are there out there that give this business the ability to grow? To pay dividends? To make acquisitions?' As opposed to being hamstrung by some covenants that the banks have as standards, not necessarily fitting each business.”
Mr Langham said the finance provider is already getting more inquires and referrals from accountants but expects to see this service line grow in the future.
With so many SMEs reporting they are in growth phase, obtaining capital under appropriate terms will be vital to seeing these expectations fulfilled. Without the appropriate advice, many strong businesses will struggle to find the right finance for them, according to Mr Langham.
“It’s a good business, they’re in growth phase, but it doesn’t fit the bank because of covenants such as those and then the deal is coming to us after the banks rejected [them].”
“They’re coming to us after they have been rejected by the bank and the bank's rejection isn’t necessary, isn’t poor business but it could be the interest ratio covenant isn’t high enough or the debt to equity ratio isn’t high enough.”
“I think there is a role for accountants and advisers to be more proactive in that area,” said Mr Langham.