Businesses need to rethink their approach to finance or the effects of the recession will be unnecessarily prolonged, HSBC research suggests.
Its report “Business of Recovery”, which questioned over 2,100 small businesses and 30 business and economic experts, concluded companies surviving the downturn will emerge in a fitter state due to restricting cash flows and reducing costs.
However, if the trend for parsimony becomes too entrenched, with companies cost-cutting at the expense of investment, economic recovery may be hampered.
Currently, only 15% of UK-based companies are seeking external investment, while 80% of businesses report they ‘don't need money' due to belt tightening and utilising their own resources.
A surprisingly low percentage of firms (17%) claim they are not seeking finance because ‘banks are not lending'. European Central Bank research seems to verify this as it found 70% of businesses trying to access finance across Europe are currently able to do so.
In light of the findings, HSBC Commercial Banking is urging businesses to take a longer-term approach. It highlights while a third of businesses are reporting access to finance is likely to be a key challenge in 2010, 85% are not currently seeking external finance, leading to a potential funding lacuna further down the line.
Noel Quinn, HSBC head of commercial banking UK, says: "Confidence is returning among UK businesses and although tough times have demanded a short-term approach to doing business, now is the time to take a forward view if the much-heralded economic recovery is going to become reality.
"But, overall, we are still experiencing a lack of demand for finance from businesses, despite having made funds available. We believe that now is the time for companies to revisit financial plans and consider using different types of finance for the future."
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