Finance for Small and Medium‐sized Enterprises: Information and the Income Gearing Challenge Available to Purchase

Finance for longer‐term investment continues to be identified as a problem in the small and medium‐sized enterprise market. Recently the finance gap has been attributed to the use of capital gearing as a lending assessment technique. Income gearing, which would take account of the borrower′s expected future income flows may help to close the finance gap. Using a postal questionnaire and in‐depth interviews,information was gathered from companies about their forecasting procedures. The findings show that many companies have the necessary infrastructure to forecast income flows. However practice and culture need to change if lending based on income gearing is to become a reality. Company forecasts lack depth, and the time horizon chosen is too short especially in relation to capital expenditure budgets. In the small and medium sector the relationship between budgets and strategic planning is not yet understood.