Cashflow pressures holding back SME growth despite appetite to invest, eCapital report finds
A new survey has revealed the scale and impact of cashflow pressure facing B2B SMEs across the UK and identified how these constraints are affecting their ability to invest and grow.
The Censuswide research surveyed 500 financial decision makers at SMEs that provide goods and services to other businesses. It found that two in five (39%) say restricted cashflow has prevented them from pursuing growth opportunities in the last 12 months while one in six (15%) say that severe cashflow pressures are threatening the survival of their business.
Among businesses that had experienced cashflow pressure, the most commonly cited cause was late payments from customers (55%), followed by rising operating costs including energy (42%) and higher wage costs or employer taxes (35%).
If cashflow were not a concern, however, over two in five (42%) would invest more in growth, including hiring, expansion and equipment. A third (34%) say they would take on more contracts and customers. This signals wider economic benefits if SME access to working capital could be improved.
Commissioned by eCapital UK, a leading asset-based lending funder, the findings come as prime minister Andy Burnham has given No.10 North responsibility for driving regional economic prosperity. Created on Cash Flow reveals the challenges facing regional SMEs and how greater access to working capital could unlock this growth.
Mark Finn, chief revenue officer of eCapital says: “SMEs are a major engine of the UK economy. As cashflow pressure mounts due to energy bills, inflation and increased cost of employment, we’re seeing too many businesses holding back from hiring and investment. We can also see them turning to unsustainable forms of borrowing, such as credit cards and short-term loans. Both options undermine SMEs’ ability to expand, making cashflow management a wider economic growth issue.”
The findings show that borrowing and credit already play a significant role in managing cashflow for SMEs. Over four in five (85%) businesses surveyed used at least one loan, overdraft or credit facility in the last year.* Over a third have turned to overdraft extensions (38%) or credit cards and informal borrowing (37%), while three in ten (29%) are using short-term loans. Just 14% have a structured working capital solution in place.
This pressure is taking a psychological toll on business owners too: almost a third (31%) say managing cashflow causes regular worry, while over one in ten (12%) have lost sleep over it.
Dr Clare Mulligan-Foster, BPS chartered psychologist and executive leadership coach analysed the findings for eCapital UK. She said: “Financial uncertainty doesn’t just affect balance sheets, it changes behaviour. When we are unsure of something, our brain interprets that discomfort as a form of threat. By improving visibility over cashflow and building confidence in future financial resilience, however, businesses are better able to move from reacting to uncertainty to making deliberate, strategic decisions.”
Outdoor Living Ltd shows what this can mean in practice. The North West-based garden furniture wholesaler, which supplies major UK retailers, faced strong demand but was constrained by a working capital gap created by long import times that limited how much stock it could buy and, in turn, its ability to grow. Invoice finance gave it the confidence to commit to larger stock programmes and pursue opportunities when they arose, as turnover grew from £1.2m in 2023 to £2.2m in 2025.
Chris Dobson, co-founder of Outdoor Living Ltd, said: “The constraint on this business was never the demand, it was working capital. We always had the ideas and the ambition to grow, but we found ourselves buying what we could afford rather than what we knew we could sell. Invoice finance changed that. We now have the confidence to commit to larger stock programmes, plan further ahead and invest in the business when the opportunity is right, rather than when the cashflow allows.”
The report also lands as late payments receive renewed attention, with the Commercial Payments Bill progressing through Parliament. Nine in ten (93%) SMEs surveyed have accepted a contract with unfavourable payment terms to secure business, with over a third (35%) doing so often.
Finn continues: “The government’s proposed payment measures have brought the wider issue of working capital into focus. Late payments are an important part of the problem, but even businesses paid on time can face working capital pressures created by long payment cycles, stock requirements and other operating costs. Managing cashflow is about having access to the right funding, including solutions such as invoice finance that can release cash tied up in unpaid invoices, to mitigate payment cycles and support growth.”
“Action on late payments must be accompanied by greater support to equip SMEs with the knowledge and tools to manage working capital effectively. That means better financial education, clearer guidance on the alternative funding options available and stronger signposting to specialist advice, so businesses can make informed funding decisions before cashflow becomes a barrier to growth.”
To download the Created on Cash Flow report visit: ecapital.com