SME confidence showing green shoots

But sales forecasts a mixed bag, ScotPac says

SME confidence showing green shoots

The loosening of COVID-19 restrictions has given small-to-medium sized businesses a confidence boost, with over half predicting an increase in sales to October, a new report shows.

But despite many having anticipated a business bounce, one in four expected business revenue to decline by an average of 7% over the same period.

A bi-annual SME Growth Index released by ScotPac, which incorporated feedback from over 700 industry participants, shows confidence grew by 6% compared to the same period last year.

The average projected revenue growth rate among businesses surveyed was between 5% and 6%: up 37% year-on-year, the non-bank business lender said.

Compared to the previous year, ScotPac said there was a 24% jump in the portion of new businesses, with 24% identifying as being in startup phase.

Revenue growth forecasts ranged from +10% to -17%, which ScotPac said illustrated “ongoing uncertainty in parts of the economy”.

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Given the uncertain economic environment, ScotPac Business Finance CEO Jon Sutton (pictured above) said the mixed forecasts were understandable.

“The wide spread of growth projections highlights the uneven impacts of the pandemic, especially in areas like skilled workers and supply chain issues,” Sutton said.

With most businesses projecting their revenue to grow and the increased number of startups, Sutton said the results reflected the resilience of Australia’s SME sector, noting business confidence tends to fluctuate more during federal election years.

Having helped business owners at various stages of growth and points of the economic cycle for over 30 years, Sutton said ScotPac had the breadth of product to help the sector along the path to growth.

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Citing examples of ScotPac customers who used finance to help grow their business during the COVID-19 pandemic, Sutton said one was a transport company that had a working capital facility of up to $1.5 million, with a separate asset finance facility used to assist with fleet expansion to meet demand.

The other was a wholesale business with an invoice finance facility limit of around $700,000, used to provide working capital.

Since 2020, in both cases, businesses experienced significant revenue growth, the transport company having doubled its revenue, Sutton said.

A case study provided by ScotPac on Sanikleen Group shows invoice finance provided increased cash flow, enabling the business to take on new contracts when they arose, rather than having to wait months for capital to become available.

Having a facility that paid 80% of the invoice value upfront removed cash flow concerns for the business, funding startup costs, initial wages, and other items such as superannuation and tax, before receiving cash from the customer, Sanikleen CFO Jacob Bush said.