Only 1 in 25 SMEs turn to commercial mortgages

Only 1 in 25 SMEs turn to commercial mortgages


Almost two fifths of SMEs continue to rely on their cash reserves to see them safely through the recession and to finance their future growth, according to research undertaken by a UK challenger bank.

Aldermore Bank’s research, which consulted 300 enterprises across the country, confirmed that 38 per cent of SMEs depend on cash reserves to fund their future growth ambitions.

Of the remainder, 12 per cent said that their future plans would be funded by a bank loan, 10 per cent through leasing or hire purchase, 9 per cent by an overdraft, 7 per cent using factoring and invoice discounting and 4 per cent gaining funding through a commercial mortgage.

8 per cent of business owners claimed that they would use their own cash to promote growth, while 10 per cent said that they were not planning to fund future expansion at the moment.

Aldermore’s findings are supported by data released in October by the International Trade Monitor, which claimed that a lack of confidence has led more than a fifth of all SMEs to consider alternative sources of funding.

The previous data found that 44 per cent of alternative funding came from asset-based finance, 31 per cent from factoring and 26 per cent out of personal savings.

Established in 2009, Aldermore has to date lent more than £1 billion to 12,000 SME customers throughout the UK, increasing its client base by 52 per cent in the last year.

Damon Walford, Managing Director of Aldermore Invoice Finance, said: “As

 cash reserves become depleted, business owners will need to consider alternative forms of funding, such as invoice finance and asset finance.

“Although SMEs have relied heavily on bank loans and overdrafts in the past, many business owners have realised the vulnerability of having all their eggs in one basket and are now considering diversifying their funding sources. SMEs have more choice than they may realise; it’s worth consulting an accountant or commercial finance adviser to discover just what’s available.”

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