Originally written by Timothy Adler on Small Business
Small businesses are mostly taking out loans to manage their cashflow rather than investing in their companies, according to research.
Almost 40 per cent of small businesses that borrowed money in the last quarter of 2019 used cash to keep going rather than invest in their firms, says the Federation of Small Businesses.
This compared with 23 per cent using finance to update equipment, 16 per cent to expand their business or just 2 per cent for hiring staff.
>See also: Small businesses spend hour and a half each day chasing late payments
That small business is using external finance to cover outstanding invoices highlights the late payment crisis, says the FSB. The latest figures from Pay.UK show that the balance of outstanding late payments almost doubled to £23bn in 2019.
And applications for external finance dropped off in Q4 as the share of firms describing credit as “unaffordable” rose, despite more being offered at sub 4 per cent lending rates.
Mike Cherry, national chairman of FSB, said: “It’s troubling that so many external finance applications are driven by cashflow concerns. You wouldn’t dream of doing your weekly shop and telling the cashier that you’ll pay for it in