By Peter Ewen, chairman of The International Factors Group

The last few years have left many SMEs feeling like ‘rabbits in the headlights’. A lack of confidence in the economy and a perceived lack of available funding means many businesses are static and afraid to grow or seek out new opportunities.

SMEs could be the engine of UK growth, but not if so many are left at the starting line. Small businesses are understandably nervous but rather than waiting for a second recession that may never come, companies need to kick-start growth by getting their finances in order and exploring the increasing opportunities that recovery presents.

Four major trends for businesses to consider are refinancing, M&As, exporting, and of course securing cashflow.

Refinancing
As the economy picks up, managers are shifting their focus from the day-to-day realities of keeping their company viable to the future, refinancing to put themselves in the best possible position for growth.

This can only be a good thing. No one can blame businesses for battening down the hatches during hard times, but today’s ‘progressive’ refinancing is just as likely to be triggered by market opportunities or a forward-looking assessment of cashflow, costs and economic conditions. In other words, businesses are beginning to look at their financial requirements proactively rather than reactively.

M&A
Many businesses have come through a difficult two to three years in reasonably good shape given the battles they have faced. These companies should be looking to the future and, in particular, at some of their competitors who are not doing so well.

There are certainly M&A bargains to be had and, now that a few green shoots are starting to show, an increasing number of business owners will be looking to sell. To make the most of this opportunity, acquisitive businesses need to organise their finances so they are ready to move when the opportunity arises. They need to look beyond the traditional forms of funding by understanding the assets they possess that could help structure a merger or acquisition – without sacrificing cashflow at the crucial post deal stage.

Exporting
As well as growing at home, many companies are looking for opportunities outside of the UK. Emerging nations continued to power ahead throughout the ‘global’ recession, while countries closer to home like Germany and France seem ahead of the UK in terms of economic recovery.

This demand from abroad, along with the downward trend of the pound, has created new opportunities for companies that have never exported before. Those that are already selling abroad are now exploring markets even further afield. This said, selling overseas can create as many challenges as it does opportunities. Arguably the greatest concern for businesses entering new markets is uncertainty surrounding payment.

On the face of it, the process of collecting money from an overseas customer is similar to a domestic transaction. However, there can be significant differences, particularly in terms of debtor days. In some European countries, the norm is typically 90 days from the date of the invoice. This will have clear cashflow implications for UK companies that are more accustomed to a 30 to 40-day turnaround.

Ensuring cash flow via outsourced credit control or maintaining a cash buffer is vital when selling abroad. With the right finance, and guidance, exporting could provide a real boost to UK businesses.

Cultural and business differences must also be considered especially if venturing beyond Western Europe. The government is keen on fuelling this kind of growth and is providing very useful advice for those that care to look.

Securing cash flow
Above all, businesses need confidence and sustainable finance in order to grow. Small businesses continue to face tough times because cashflow remains a serious issue and they are still struggling to access the financial confidence needed to move from a survival mentality to one of growth.

For whatever reason, traditional financing methods are not meeting today’s business needs and it is essential SMEs understand the full repertoire of funding they can access. The banks have been singled out as the obvious ‘villains’ for continuing business difficulties, but to lay all the blame on them is wrong. The missing part of the puzzle is education from all involved. Businesses need to know about the support and other forms of finance available, to help them handle this new business environment.

In the last few years, businesses have adopted a defensive formation as their survival instincts have kicked in. Now, many are recognising opportunities for growth. Having the confidence, and funding, to invest in success is not only crucial for individual businesses but also for the wider UK economic recovery.

See also: Media recovery yet to arrive