Growth survey – businesses using own cash to grow

Nine out of ten firms in the South West are using their own cash reserves to finance their growth plans, according to a new survey.

The survey, independently conducted by insider magazine and sponsored by Bishop Fleming, asked the region’s businesses how they were planning to finance their growth over the next twelve months.

Only a quarter of the firms who responded to the questions said they planned to ask the bank for funds, even though interest rates remain at a record low and are unlikely to increase significantly in the foreseeable future.

Such low interest rates create capacity to finance growth, but the survey clearly indicates that most businesses would rather rely on their own self-generated cash to finance investment and recruitment, at least for the time being.

A key reason for firms holding off borrowing is the uncertainty around Brexit and the eventual deal that will be reached between the UK and EU. This reticence to borrow may change once there is clarity on the Brexit terms.

Another reason may be that small firms have experienced reluctance on the part of banks to lend, particularly where the amounts in question are less than £1m.

As regards other significant sources of funds to finance growth, only grant applications appeared to be on the radar for business owners, but even this attracted less than 10 per cent of respondents.

Some firms have been able to take advance of the government’s Research & Development (R&D) tax credit’s scheme. Bishop Fleming has already submitted successful claims for R&D relief in excess of £250m. The firm’s tax team has considerable knowledge and expertise in the R&D market and understands how to use the rules to maximise a claim.

Bishop Fleming’s Corporate Finance team can also help source the right funds for business projects and maintains a database of lenders and investors.