SMEs increasingly bullish about revenues and growth: Survey

Confidence among SMEs is picking up, with a majority expecting an increase in their business revenues over the next six months, according to figures released today.

The Scottish Pacific SME Growth Index, which was conducted by research firm East & Partners for debtor finance company Scottish Pacific, surveyed 1257 Australian SMEs with annual turnover of between $1 million and $20 million.

Most of the respondents surveyed were chief executives or business owners (60.1%), followed by chief financial officers (8.4%), finance directors (8.4%) and company treasurers.

The report found 62.6% of SMEs expect an increase in their business revenues over the next six months, while 24.2% expect no change and just 13.2% predict a decline over the same time frame.

Those businesses predicting an increase in revenue on average predict an increase of 8.6%, compared to an average decline of 3.9% among the pessimists.

Just under half of all business owners surveyed (45.5%) described their business as being in “growth mode”, while just under a third (32.3%) said their business is either stable or consolidating and 8.5% said their business is contracting.

Not surprisingly, 99.4% of entrepreneurs and managers who describe their business as growing also say they are planning to introduce new products or services in the coming months. This is in contrast to just 17.2% among businesses who see their business as stable or contracting.

The results appear to contradict figures collected by the Sensis Business Index (SBI) in June. That report showed slumps in consumer spending and demand, along with increased competition, had given rise to the lowest confidence levels among SMEs since February 2009, immediately after the start of the global financial crisis.

Scottish Pacific chief executive Peter Langham told SmartCompany while confidence is strengthening, financing growth remains a challenge for many businesses.

“Of the companies that are growing a large proportion are looking to add new products and services. It seems doing the same thing isn’t going to cut it anymore,” Langham says.

“From the survey, a key issue was not so much the cost of credit as the conditions of credit, with a high percentage using personal assets as security.”

“This would indicate greater needs that aren’t being fulfilled by traditional business banking.”

The report found 61.2% of SMEs believe credit conditions are a barrier to growth, with a further 11% citing credit availability.

For businesses using personal assets as security, Langham says trade finance and specialist equipment finance are options businesses looking at growth should consider.

“Industries like ours, trade finance and receivables finance, the business assets being financed are used as security for a loan, while specialist equipment finance uses the plant or equipment being financed as security.”

The figures come after a report in June showed banks pocket more profit from lending to SMEs than they do from residential mortgages.