Businesses, Their Banks And Cash Concerns

Corporate travel
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This week’s Data Digest is all about businesses and their banks. With new analysis streaming in from the U.S., U.K., Europe, China and India, it becomes clear that corporates have mixed feelings about their current cash positions.

Take Europe, for example. While alternative small business lending in the U.K. hit record-level peaks last year, corporate treasurers across the EU are stressed, even as they remain flush with cash.

And, in Asia, corporate lending also reached new highs, for both banking and alternative financing, but so did bad loans. It just goes to show how even amid global economic recovery, more money really can mean more problems. 

 

$385 billion worth of loans was issued by Chinese banks in January, a new record for the country, local reports said. That volume of bank financing to corporates may also signal an impact from less rigid monetary policy following China’s economic slowdown. Other experts say the trend may be a result of Chinese businesses looking to pay off loans borrowed in U.S. dollars amid the currency’s recent bolstering. But the trend comes with a caveat: The nation is also seeing record levels of bad loans issued, with about 1.67 percent of banks’ total loans in 2015 being nonperforming loans. That marks the highest percentage since 2006, according to reports.

$2.14 billion in P2P business loans were issued in the U.K. in 2015, new analysis from Nesta and the University of Cambridge revealed. Their report, “Pushing Boundaries — the 2015 U.K. Alternative Finance Report,” concluded that P2P business lending in the country “nearly doubled” the previous year, with business lending holding the greatest volume of this financing. Invoice financing also spiked, reaching more than $467 million in value last year.

60 percent of SMEs are pleased with their cash flow over the last 12 months, according to a new survey released last week by Wells Fargo. Such positivity has not been seen since 2007, reports said. With these businesses saying their cash flow was either very or somewhat good, the research led analysts to heighten their Wells Fargo/Gallup Small Business Index to its highest level in a year. The research uncovers a new level of optimism among U.S. SMEs, researchers said, with 66 percent of these companies also anticipating very or somewhat good cash flow over the next 12 months.

20 percent of Power2SME’s GMV is now a direct result of sharing credit data on its SME customers in need of financing, the Indian eCommerce site’s founder, R. Narayan, told reporters last week. That statistic may seem benign, but reports last week said that figure signals the quick rise in partnerships between B2B procurement sites and financiers, as well as a change in how small business owners actually seek out their financing. According to reports, only 1 percent of the commission from linking lenders to SME credit scores comes from online marketplaces. But B2B commerce is likely to play a major role in helping small businesses move online to access working capital, reports added.

8 U.S. states now have access to Square Payroll, the SME payroll service provided by the payment processor. The number spiked when the company revealed that it expanded the service to five new states from the initial three. California was first to access Square Payroll at its launch last year, soon followed by Texas and Florida. Today, business owners in Alaska, Nevada, New Hampshire, South Dakota and Tennessee can now link their systems to Square Payroll. According to the company, the expansion means its payroll tool is now an option for more than 30 percent of the nation’s independent businesses.

2 areas in particular are most concerning for EU corporate treasurers: cash and liquidity. That’s according to new analysis from Greenwich Associates, which rolled out the findings of a survey conducted with more than 2,500 CFOs and corporate treasurers from Europe. Researchers pointed to two factors that make cash and liquidity these professionals’ top concern. One is that low interest rates allowed businesses to stock pile their cash, unwilling to invest in a volatile market. The second is the exit of the Royal Bank of Scotland from transaction banking outside of the U.K., along with other financial institutions reshuffling their corporate cash management operations, according to reports. The latter fact also led to one-fifth of corporate treasurers citing “switching cash management providers” as their top challenge for this year.