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September 30, 2019

A national survey of more than 1000 businesses shows a two-and-a-half year high in SME revenue sentiment – but there is a marked difference between metropolitan and regional small businesses.

The September 2019 SME Growth Index found more than half of all SMEs (54.6%) are expecting revenue growth for the back half of 2019 and are predicting an average 5.1% revenue increase.

One in five are flagging a revenue decline, by an average of 5.7%. When the whole SME market is taken into account, the forecast revenue increase averages at 2.7%, stronger than any time since March 2016.

While this figure is well short of the 4.9% revenue growth SMEs were forecasting in 2014, it is more than double that being forecast by Australia’s small business sector in 2018 and early 2019.

The research is conducted by banking analysts East & Partners, on behalf of national working capital funder Scottish Pacific. Twice a year owners, CEOs or senior staff of small to medium businesses across Australia, with annual revenues of $A1-20 million, are surveyed.

Scottish Pacific CEO Peter Langham said the research had indicated that only 47.3% of regional businesses expect positive revenue for the remainder of 2019, at an average of 3.1% growth. More than a quarter (27%) expect revenue to decline, by an average of 6.8%.

The metropolitan SME sector, with most respondents located in Sydney and Melbourne, is more buoyant. 57.7% of metro small businesses expect positive revenue growth, forecasting an average increase of 5.8%. Just under one in five (18.1%) think their revenue will decline, by 5% on average.

“Revenue optimism for both city and country small businesses has dropped over the past five years. For metro SMEs, we’ve seen a six percentage point fall (from 64.4%) and regional small businesses recorded even greater disparity - a 10 percentage point fall (down from 58.3%),” Mr Langham said.

Cash flow issues for city and country SMEs

Mr Langham said that while the revenue outlook was a forward indicator, looking back over the past 12 months indicates that regional businesses had been feeling more confident about cash flow in 2019 than in 2018. Regional SMEs were more likely to report improved cash flow than their metro counterparts.

Improved cash flow was reported by 71.4% of regional SMEs but only 54.3% of city-based small businesses.

Significantly more metro SMEs reported that their cashflow had become worse over the past year (cash flow worse for 22% of metro SMEs, 13.9% of regional businesses).

Download the full report.

The September SME Growth Index found that more than one in five SMEs said they had cash flow issues due to having been rejected for a business loan.

Other key cash flow concerns included issues with government red tape and compliance (a problem for 72.3% of SMEs), customers paying late (40.1%), suppliers reducing payment terms (39.4%) and having to write off bad debts (5.2%).

SME cash flow woes include having difficulty meeting tax commitments on time (an issue for 27.8% of businesses) and being unable to take on new work (22%).

SMEs looking beyond banks to fund business

“How small and medium business owners fund growth is a growing problem the sector must overcome, with ASBFEO citing figures indicating that up to a third of SMEs say they have had funding rejected,” Mr Langham said.

The September SME Growth Index found intention to fund growth using non-banks is now at its highest, with 18.7% of SMEs saying they’ll support their 2019 revenue growth plans by using non-bank funding.

Only 2.6% of SMEs would not consider using a non-bank lender, almost halving from 4% last year.

“There are smarter ways for both metro and regional SMEs to fund long-term business growth. We’re working with the relevant government bodies, SME advisors and SMEs themselves to try to increase Australian business owners’ understanding of a range of different ways to fund their enterprises,” Mr Langham said.

Scottish Pacific in partnership with the Australian Small Business and Family Enterprise Ombudsman recently released a comprehensive independent guide outlining a wide range of funding options suitable for different small business needs.

The Business Funding Guide, targeted at advisors such as accountants, brokers and book-keepers, and the FitsME Guide, its short companion for SMEs, are both available as free downloads.


Scottish Pacific is Australasia’s largest specialist working capital provider, helping thousands of business owners with the working capital they need to succeed. Scottish Pacific lends to small, medium and large businesses ranging from start-ups to SMEs with revenues of more than $1 billion. www.scottishpacific.com

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