Smes Stuck in Confidence Trap

• Eight in ten are not confident about the steady recovery of the economy.
• Over half expect business to remain static over the next year.
• Two fifths lack knowledge about alternative finance.

The majority of SME leaders (79 per cent) are not confident in the steady recovery of the economy, according to new research released from Close Brothers Invoice Finance, the independent asset based lender.

The research, which combines the views of 700 SME owners and managers, shows that a fifth (21 per cent) believe that business is tougher than ever before, and as a result, more than half (53 per cent) expect their business to stay the same over the next year.

The findings also highlight how nearly half (49 per cent) do not have plans to raise finance, and of those that do, 36 per cent plan to use a bank overdraft or loan.

David Thomson, CEO of Close Brothers Invoice Finance, comments:

“SMEs are clearly still worried about the state of the economic recovery, resulting in a lack of confidence about growth. Now that the economy is starting to recover, the finance industry needs to inspire businesses about the possibilities and opportunities in this improving environment.”

Barriers to growth 

The research also looks at the main barriers to growth for SMEs, with cash flow and late payments at the core. Nearly a fifth (19 per cent) of business leaders state that cash flow is their main business concern, and 18 per cent argue that restricted cash flow is the main barrier to growth.

Additionally, four in ten (40 per cent) business leaders feel that late payments are a problem.

Of those business leaders that admitted this, almost six in ten (58 per cent) believe that it makes cashflow difficult to manage, and worryingly, 15 per cent admit that it seriously threatens the business’s ability to trade.

David Thomson, comments:

“While the economy is on the up, SMEs still face challenges. The ever present scourge of late payments is an important hurdle that they must overcome.”

The study also found that two fifths of SME leaders (40 per cent) don’t know enough about alternative finance, such as invoice finance, to choose it as a method of funding growth. Nearly three fifths (57 per cent) of business leaders in the North East agreed, closely followed by East Anglia (54 per cent).

David Thomson, comments:

“Evidently confidence is low, but as the economy shows further signs of improvement it’s important that SMEs know about all of the opportunities that are available to them for funding growth.”