Finance your family business with a small business loan
In the ever-changing business landscape of the 21st century, the family business is still going strong. According to the IFB (Institute for Family Business), two thirds of UK businesses are family owned - 4.7 million in total. 17,000 of these are medium and large businesses. These businesses generate over 25% of the UK GDP and 20% of UK government revenues.
Many of these businesses have been operating for hundreds of years. They come in all shapes and sizes - and sectors - and employ almost 12.2 million people in the UK, accounting for 47% of private sector employment.
But what does the future hold for family businesses? Here are three of the key challenges that they are facing:
Keeping it in the family
According to the IFB, around 100,000 family businesses transfer ownership between generations each year, and 420,000 are expected to do so over the next five years.
One of the key challenges that faces family businesses is the smooth transition from one generation to the next. The recent PwC Family Business Survey found that protecting the long term future of the family business is the key goal for 68% of respondents in the UK and that 41% plan to ensure the business stays in the family. However, despite this desire to keep it in the family, many family businesses are not sufficiently proactive in developing family members to undertake leadership roles. PwC found that only 13% have a robust succession plan in place that is both fully documented and disseminated within the business.
Family businesses are often wary of seeking additional investment in the business. Even if the form of investment doesn’t impact on their ownership of the company, they perceive that it will involve them in relating and being accountable to people outside the business. It is not surprising therefore that only 56% of UK family firms consider financing business growth through small business loans or other means of external finance - as compared to the global average of 78%. This cautious approach towards external business funding could be a blockage to their business ambitions.
Changing with the times
In the uncertainty over Brexit these are challenging times of all UK businesses but some family businesses are even more vulnerable. Established and more conservative family businesses can be a bit behind the curve in terms of innovation and new technologies. According to the PWC survey, fewer than half those businesses surveyed have a strategy fit for the digital age.
The survey found that most UK family firms are hopeful of future growth and cited plans that include improving the quality of their workforce, investing in new machinery, regional expansion, and diversification. However, these ambitions and expectations still lag behind their global counterparts. For example, only 34% anticipate expanding into markets in new countries as compared to 52% of family firms globally expecting to develop new markets.
Nevertheless 93% of UK family businesses do anticipate growth, and Brexit has failed to dampen their export ambitions.They predict that exports, as a proportion of overall sales, will increase from 19% to 24% over the next five years. A third do fear the impact of Brexit, but only half plan to take preventative action to reduce the effect.
It is clear from the above that - despite economic uncertainties and the challenges they are facing - family businesses are set to remain a vital part of the UK economy. They bring with them strong values and stability , offer jobs to others and responsibility to their communities - and engender tremendous loyalty in return.
At Fair Business Loans we are passionate about supporting family businesses and you can see many examples on our Case Studies page of how our small business loans have helped them. To find out more about how we might be able to help your family business grow, get in touch with us today!