On the plus side, the research (part of the bi-annual SME Trends Index compiled by broker Hilton Baird) does show that the UK’s entrepreneurs are a resourceful bunch: with the banks generally reluctant to splash the cash of late, they're securing finance in any way they can. Half are apparently turning to bank overdrafts to fund their business, while 44% are hitting the plastic to ensure they can keep paying the bills. And in the circumstances, who can blame them?
However, this isn't a very sustainable approach to financing. No-one can be blamed for veering into the red from time-to-time, but it’s not ideal when it’s an ongoing arrangement - after all, money borrowed on a credit card attracts punitive rates of interest. The research doesn’t give us any information about how long term this borrowing tends to be; if it’s just to bridge a gap until late-payers (who are apparently getting worse) cough up, then that’s one thing. But if it's over an extended period, the debts can really mount up. Funding yourself on credit cards is a risky business, even for risk-friendly entrepreneurs.
So what’s the answer? Well, clearly to try and provide SMEs with more financing alternatives, so they can get their hands on their readies without having to dig into their overdraft. That £76bn pledged by the banks might help to some extent - but only if the banks actually stick to their promise, and only if they don't impose hugely expensive charges for the privilege of borrowing. Either way, it looks unlikely to solve the problem at a stroke. SMEs may have to keep getting creative for a while yet.