ScotPac index points to funding pressure and weaker revenue confidence
Access to funding has become the leading obstacle for Australian small and medium-sized enterprises seeking to meet revenue targets, according to the latest ScotPac SME Growth Index.
The research found that 51% of SMEs were not confident they would achieve their near-term revenue goals, despite signs of business optimism. The findings point to a gap between expectations and the ability to convert opportunities into income.
“SMEs are telling us they see opportunity ahead, but they’re far less certain about their ability to convert that into actual revenue,” said Jon Sutton (pictured top), chief executive of ScotPac. “At the centre of that gap is access to capital. Nearly 40% of SMEs now identify access to finance as the single biggest barrier to success.
“When you add the potential supply chains and cash flow impacts for SMEs arising from the tensions in the Middle East, it is critical for SMEs to be sitting down with their advisors to ensure they have the right funding structure in place.”
The report also found that demand pressures were weighing on business confidence. Some 28% of SMEs said cost-of-living pressures were reducing customer demand and affecting their ability to reach revenue targets.
“The Middle East conflict has already flowed through to higher fuel costs and broader input prices, particularly across petrochemical-linked supply chains,” Sutton said. “That is placing additional pressure on margins and cash flow and increasing the need for SMEs to have reliable access to working capital.”
Sutton said businesses may face timing issues even when they are able to recover higher costs through pricing. “Businesses may be able to pass on cost increases, but there is often a lag before that revenue is realised,” he pointed out.
“That’s where access to flexible funding solutions becomes a necessity – not only to support growth, but to relieve pressure on day-to-day operations in uncertain economic times by bridging the gap between costs being incurred and income being received.”
The SME Growth Index also reported that 15% of businesses were finding it difficult to secure grants that could assist expansion, while 14% identified time constraints as a factor limiting performance improvement.
According to Sutton, SMEs should review funding early and engage with finance providers before problems emerge. “Given the scale of global disruption we’re now seeing, SMEs should not wait until cash flow becomes a problem,” he said. “Now is the time to speak with your finance provider, review your funding structures, and ensure you have the flexibility to respond to changing conditions.”
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