SMEs Say NO To Bank Debt

15th March 2018.

Britain’s small businesses are turning their backs on bank debt, deepening concerns over stagnating productivity and faltering economic growth.

High street lenders have received another blow to their already-battered relationship with small and medium-sized companies, as a new survey has revealed that almost half describe themselves as “permanent non-borrowers”. This has worried experts, with many presuming that businesses will struggle to find funding elsewhere, and will see their business shrink as a result. However, this shift in attitudes will reduce risk, with finances no longer threatened by high-interest rates and even further debt. As consumers reign in on credit, the economy could benefit from this renewed conscientiousness.

This is not to say that businesses should not seek funding, but that there are alternatives to borrowing. While high street lenders are certainly the most traditional route to go down, they are also the least reliable and as recent scandals have proven, even the least ethical. At the Credit Protection Association, we change the game completely for our members. Rather than borrowing money that belongs to someone else, our members see their own money returned. At CPA, we merely recover cash that is owed; debts that had never been recouped or late payers who had never been chased. Our members can expand their business without shrinking their cash flow. This drop in bank debt may give the sector a bit of shake- but hopefully in the right direction.

The SME Finance Monitor, which is funded by the high street banks and conducted by BDRC, the research firm, highlighted a marked decline in the use of external finance over the past six years. Last year a mere one in six companies that are not using external finance said they would be willing to do so, down from a quarter in 2015.

Only one in three indicated a willingness to borrow to finance growth in 2017, down from almost half in 2015.

Kevin Hollinrake, MP, co-chairman of the all-party parliamentary group on fair business banking, said: “Many businesses we speak to will not borrow due to a lack of trust in big banks following the recent business banking scandals.”

Businesses need to grow and compete, but they do not need to borrow. As the world changes and business concepts transform, traditional banking loses its power. While going to the local bank may have once been the only option, businesses now have a range of different choices in front of them. While crowdsourcing and peer-to-peer platforms still involve borrowing to some degree, the business owner is in the power seat. Furthermore, credit management and debt recovery companies offer businesses not only a way to expand their business, but also to change their finances for the better.

At the Credit Protection Association, we are not only a credit management or debt recovery company; we are all of them. Our debt recovery services will give our members the cash they need, while our credit reports and monitoring tools will ensure our members’ cash flow is protected from further debt or bad payers. Despite what experts seem to think, here at CPA we do not think the economy will suffer from more conscientious businesses, instead, it can only get better.

The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!

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