Funding issues a persistent source of frustration for SMEs, survey says

The latest SME Growth Index from Scottish Pacific (ScotPac) found that the top three frustrations were loan conditions (84 per cent), having to provide property security (80 per cent) and lack of flexibility (74 per cent), all of which were greater for SMEs than when last polled 18 months ago.

COVID-specific response options were added to the research, highlighting very clear frustrations:

• Two-thirds of SMEs (64.5 per cent) were worried about the lack of a clear recovery path;
• Almost half (47 per cent) had difficulty accessing government-guaranteed loans during COVID-19; and
• Nearly a quarter (23 per cent) were frustrated about online lenders charging high interest rates.

“Loan conditions have always been the main source of annoyance when we’ve asked SMEs about their funding frustrations, and during the pandemic, it has been no different,” said ScotPac chief executive Jon Sutton.

Most SMEs looking to pay down their debt in 2021

However, Mr Sutton said the irony is that many of the federal stimulus measures that helped prop up the national economy required SMEs to take on more debt.

“Historic index data shows a very large proportion of small businesses use easy access debt (such as personal credit cards or their own funds) to access working capital for their enterprises,” Mr Sutton said.

“2021 is the right time, hopefully, with the worst of the business shutdowns behind us, for SME owners to make the tough decisions about their business and find better ways to fund their operations.

Mr Sutton encouraged small business owners to have the tough conversations with their advisers — sooner rather than later.

“Don’t wait until JobKeeper is off the table for you or your suppliers; get on the front foot with finding the right funding and make decisions before it’s forced on you,” he said.