Many firms ‘still unwilling to borrow to expand’

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Lancashire businesses are still unwilling to borrow funds, with nearly half preferring to spend their own cash, a survey has found.

A poll of 165 SMEs conducted by KPMG has found that 46 per cent of businesses plan to draw on their own cash reserves in order to finance their growth plans.

Just 21 per cent claim they will need to raise funds outside of the business.

Commenting on the findings, Richard Evans, senior partner of KPMG in Preston, said: “Despite 90 per cent of businesses feeling confident that they will achieve some growth this year, there is still a great level of caution with many businesses unable to forget the lessons learned in the recession and continuing to be risk averse.

“Nearly half of businesses are not willing to take on any risk associated with external finance and leverage their business, despite the reported optimism levels.

“This is an indication that companies are still very uncertain about the banking market, which some view as being unsupportive to small businesses during the recession.”

Mr Evans added: “SMEs are not entirely convinced that the economy is out of the woods yet with two-thirds claiming that ultimately the economic conditions would be the biggest impediment to their growth.

“If the economy doesn’t do as well as predicted or interest rates go up too early, the risk of potential insolvency will be heightened if the majority of businesses intend to fund growth from their own resources.”

The survey found that 75 per cent of SMEs are more confident about their prospects in 2014 than the previous 12 months. A fifth said international expansion would be the most critical element in their growth.