SME growth up but issues remain

Thomas Stelzer 9 October 2018 NEWS

Owners are cash-strapped and time-poor.

Australian small to medium business owners are struggling to make ends meet and working longer hours, according to the latest SME Growth Index by Scottish Pacific Business Finance.

While small- to medium-sized enterprise (SME) growth outlook is the best it has been since 2016, the study of 1,200 SMEs conducted by research firm East & Partners found a majority of business owners identified cash flow and lack of time as the key issues they faced. 79% agreed cash flow was their biggest concern and, on average, could have generated an additional 17% revenue if it had improved, according to the research.

Two-thirds of respondents also cited not having enough time in the day as their biggest business issue, with three-quarters of SME owners working 50 to 80 hours a week and one in five working more than 80 hours. Less than 1% reported they were regularly able to work a 40-hour week, with the average work week coming out at 66 hours.

Despite 51% of businesses expecting positive growth in the next six months, the average predicted growth rate has halved since the first SME Growth Index in 2014. Of the remaining 49% of SMEs, half expected revenue to remain steady over the next six months and half expected it to drop, at an average of 6%.

Any improving SME growth sentiment may be affected by the declining Australian property market and the Royal Commission into Banking. According to the research, 11% of SMEs confirmed they had changed product and service demand as a result of house prices and 8% said the revelations from the Royal Commission would provoke them to use alternative lenders to finance their business.

According to Peter Langham, chief executive officer of Scottish Pacific, the precarious economic situation means business owners should remain vigilant. "The last thing the SME sector, and the nation, needs is a lack of credit causing a major downward trend in the economy. With cash flow concerns increasing, and banks reluctant to lend, the business owner who can find innovative ways to fund growth and master cash flow management has a clear advantage over competitors," he said in a statement.

Overall, 59% of growth SMEs are reportedly after additional capital to finance growth, but only 22.5% of owners intend to finance growth from their main bank, continuing a four-year trend away from bank borrowing for growth SMEs.

While 96% of SME owners could name an advantage to using alternative lenders, 89% planned to use their own funds to finance growth and one in four cited not knowing about non-bank lenders as the key reason they would not consider them.

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