More than 90 percent of SMEs surveyed in the newly released SME Growth Index for March 2017 were unhappy about their cashflow, and the issue is costing the sector a potential $200 billion in lost revenue each year. For those SMEs in growth phase, three quarters believed if their cashflow was in a better position, revenue growth of 10 to 50 percent in 2016 could have been likely.
Produced in partnership with East & Partners, more than 1200 small to medium enterprise leaders were polled across Australia to highlight the key areas of concern faced by SMEs today.
The findings suggests SMEs face two key themes in relation to source of funding and cashflow. Cashflow issues are holding back SME revenue growth, and there is a clear move beyond traditional banks to fund business expansion. For a full copy of the Growth Index, download here.
SME intention to source funding from non-bank at record high
From comparing results from the initial research report back in September 2014, there has been double in the amount of SMEs seeking funding from non-banks (22 percent from 11 percent). This contrasts significantly with the declining bank borrowing intention from when survey began (38 percent to 29 percent).
With access to and conditions of credit re-occurring as part of the top three barriers to business growth, just under 95 percent of businesses are suggesting they have considered to use their own funds to support their business as opposed to a bank or non-bank funding option.
Over 90 percent of SMEs are not happy with their cash flow
With interest rates at record low, this leaves opportunity for non-bank lenders to take advantage of this space and provide those SMEs with the working capital they require to meet their business needs. However, there is still a startling amount of SMEs suggesting their dissatisfaction with cashflow:
- Only 8.5 percent of all SMEs are satisfied with cashflow
- Seven out of ten of all SMEs indicate at least a 5 percent increase in revenue was likely in 2016 if better cashflow was available
- Seven out of ten growth SMEs suggests if cashflow was improved it would have boosted revenue growth by at least 10 percent, with almost a quarter suggesting a 25-50 percent revenue growth
- Ninety-six percent of $1-5m revenue businesses agreed that better cashflow would have increased their 2016 revenue
- 56 percent of growth SMEs are unhappy with cashflow in comparison to 20 percent of consolidation or declining SMEs
The figures suggest SMEs who are able to gain access to cash are more likely to improve on their revenue growth significantly, especially for smaller businesses in the early stages of the lifecycle. By having access to cashflow could induce the long-term impact of revenue growth for their business.
Overall, the findings of this round’s Scottish Pacific SME Growth Index have revealed that business confidence has bounced back from previous rounds, but is still fragile. Since the survey has begun, just over 49 percent of SMEs are expecting an increase in revenue for the first half of 2017 in comparison to 63 percent in 2014.