SME growth sentiment trends down amid cashflow and funding concerns
Since September 2014 the Scottish Pacific SME Growth Index, initiated by Australia’s largest specialist working capital finance provider, has engaged independent researcher East & Partners to conduct six monthly polls of 1,200 small to medium enterprise leaders across all states and key industries.
Scottish Pacific (ASX:SCO) CEO Peter Langham said the latest results show that SME confidence has taken a hit despite the resilience of the sector, which according to ABS statistics employs almost half of the 10.7 million Australians in the workforce. “Over the past two years, SMEs predicting revenue decline have almost doubled (13.2 to 24.2% while those predicting increases have halved their growth forecasts (8.6 to 4%).
SMEs are predicting positive growth now in minority for the first time since the Index began with 48.4% outnumbered by SMEs forecasting negative growth or no change (51.6%). “The current environment is clearly placing pressure on Australia’s small to medium business community. SMEs nominated cashflow as the most stressful element of business. They cited credit conditions as a key barrier to growth.” Said Peter.
“With the Index highlighting that cash flow keeps 72.5% of respondents awake at night, it’s crucial for these leaders to find the right funding to support their business. Small businesses increasingly looking to non-banks for funding. “Businesses are increasingly looking beyond the banks to fund growth and to help ease cash flow concerns. From this time last year, there has been a 30 percent increase in SME owners planning to fund their growth using a specialist non-bank lender, with one in five now indicating their intention to do so,” Peter continued.
He also said SME Growth Index surveying took place in July and August, in the aftermath of the Federal Election and UK Brexit referendum. While uncertainty around these events may have influenced some responses, the results were a timely reminder to governments, industry bodies and financial institutions of the importance of having the right regulatory and funding systems in place to stimulate and support the nation’s vital SME sector.
September 2016 Key Results – Scottish Pacific SME Growth Index
Business confidence dips – Round Five of the Scottish Pacific SME Growth Index reveals the largest round-on-round and year-on-year percentage changes since reporting began in September 2014. 48.4% of SMEs forecast growth in revenue, compared with 59.6% this time last year. 24.2% forecast negative growth, compared with 16.8% last year.Issues keeping SMEs up at night – the top three concerns were cash flow (72.5%), not having enough time to get things done (55.2% and customer or supplier issues (39%). 17.3% were worried about disruption of their business model, and 13.3% cited staff issues.
SME owners putting in long hours – A 50+ hour week is standard for most SMEs (88.8% Almost half of SME owners and senior managers (43.7 percent) are spending 60 to 80 hours a week working on their business, which equates to 12+ hour days, six days a week.
Double edged sword of technology – Almost half of SMEs (44.6% believe mobile and digital technology has had a negative impact on their work/life balance. Only 15.7% of small businesses believe it has led to better work hours or flexible working conditions.
New products and services plans on hold – Almost half (48.9% of SMEs report no plans to introduce new products and services during the second half of 2016, up from 33.7% a year ago. This may have been influenced by uncertainty following the Federal Election.
Interest in non-bank lending increasing – Since Sept 2014 there has been a steady increase in SMEs looking to borrow from specialist non-bank lenders. This has become more marked in the past year: 19.6% plan to fund their growth using a specialist non-bank lender, a 30% increase from the figure of 15.1% in Sept 2015.
Entrepreneurs still positive – Australians are still keen to start their own business, despite barriers and tough conditions. The Index shows one in 10 SMEs are in start-up phase, a consistent figure since data was first collected in September 2014.