Australian SMEs are optimistic about revenue growth, had improved cash flow in 2017 and are increasingly looking at non-bank lending options to fund growth, a new report shows.
For SMEs with plans to invest in expansion over the next 6 months, 24% say they will fund growth by borrowing from their main relationship bank – continuing a downward trend, and well short of the high of 38% who nominated this option to fund growth in the first round of the Index in September 2014.
More than one in five SMEs plan to use alternatives to their main bank to fund upcoming growth.
Scottish Pacific chief executive Peter Langham said the March 2018 Index shows 50% of SMEs forecasting positive growth revenue - the most since March 2016, but well short of the high of 62% in September 2014. Their average estimated revenue increase is 4.3%.
Two-thirds of SMEs reported better or significantly better cash flow compared to 12 months ago.
At the other end of the scale, one in four SMEs forecast negative growth (on average dipping by 6.4%), the highest average since the Index began in 2014. One in 10 SMEs say their cash flow is worse now.
“Whether business owners are optimistic or pessimistic about revenue growth and cash flow, across the board they highlight the major impact of cash flow issues on their operations,” Langham said.
“While two-thirds of SMEs report improved cash flow, it’s revealing that nine out of 10 of SMEs say they still had cash flow issues in 2017 and nine out of 10 say these issues impacted on revenue. On average, small businesses say that better cash flow would have increased their 2017 revenue by 5-10%,” he said.
Langham said the most common issues were government red tape (nominated by 71%), suppliers reducing payment terms (38%) and customers paying late (37%).
One in five SMEs said they were unable to take on new work because of cash flow restrictions.
Twice a year specialist research firm East & Partners has conducted independent polls of more than 1200 SMEs across all states and key industries on behalf of Scottish Pacific.