'Cautious approach' to business finance revealed

Businesses are looking to reduce their bank debt in the wake of the economic turmoil seen over the past two years.

A more cautious approach to business banking is being taken by many organisations, new research indicates.

Figures released by the Confederation of British Industry (CBI) show that some 68 per cent of businesses questioned claim that they do not expect the availability of credit to improve over the next 12 months and are consequently reshaping how their firm is financed.

It was revealed half of those surveyed are looking to use less bank debt, something that could reduce firms' reliance on business credit cards.

Just over a quarter (26 per cent) of respondents are planning on increasing bond issuance, with 44 per cent considering making greater use of equity finance.

Meanwhile, it was claimed that sustainability and ethics will take a larger role in business models, as firms attempt to make accountability and corporate citizenship improvements in order to attract and retain staff.

"We may be at the start of a new era for businesses, in which attitudes to finance and to corporate leadership are changed for a generation by the shock of the past two years," Richard Lambert, director general of the CBI, states.

He adds that as firms are increasingly after a "more balanced, less risky pathway to growth", more organisations will look to collaborate closely with employees, customers and suppliers, those on the search for business bank accounts could be interested to hear.

Indeed, the CBI research indicates that two-thirds (68 per cent) of firms are looking to strengthen their links with suppliers over the next few years, as 30 per cent plan on increasing the number of organisations they work with.

Speaking earlier this month, Ian Stobie, spokesperson for PRIME Initiative, pointed out that access to business finance is proving to be a particular challenge for entrepreneurs over the age of 50 due to a widespread reluctance among banks to lend to start-ups.

By Kate Guthrie