Business loan rejection causing SME cash flow issues

More than one-in-five SMEs are having cash flow problems due to business loans being rejected, according to new research.

The report, by market analysis firm East & Partners on behalf of Scottish Pacific, also shows just one in 10 SMEs believe they are on top of their cash flow.

One of the main culprits?

More than one-in-five business owners cite being rejected from a lending product as the main reason for their cash flow issues, the report states, and a similar proportion of SMEs were unable to take on new work because of these cash flow problems.

“[This] is a massive wake up call to SMEs and their advisors to make sure they are funding their business in a way that optimises cash flow,” says Scottish Pacific CEO Peter Langham.

“A business struggling with cash flow can only stretch working capital so far before something has to give.”

Other major cash flow issues

Business owners see government red tape and compliance as the biggest thorn in their side, with almost three-quarters naming this as their greatest cash flow issue.

Other major cash flow problems stem from suppliers reducing payment terms and customers paying late.

Australian SMEs seeking other lending options

Another interesting tidbit arising from the report is that – for the first time – Australian SMEs are more likely to use a non-bank lender, ahead of their main bank, to fund their 2019 growth plans.

The report shows that over the next six months, 19% of SMEs intend to choose a non-bank lender to fund their growth, compared to 18% of SMEs who intend to stick with their main bank (down from 38% in 2014).

According to East & Partners Head of Markets Analysis, Martin Smith, the rising demand for non-bank lending options to fund new growth investment reflects the reality that there is now a broader array of non-bank lending alternatives to match business owners’ funding requirements.

Still a long way to go

While SMEs are now increasingly looking to lenders beyond the main banks, Scottish Pacific CEO Peter Langham says many SMEs fail to take advantage of the alternatives available to them.

“When it comes to funding growth, overwhelmingly SMEs opt to put their hands in their own pockets – 83% of business owners say this is how they plan to fund revenue growth,” Langham says.

“Some business owners remain unaware of funding alternatives.”

Get in touch

If you’re an SME owner experiencing cash flow problems, or looking to fund your business’s growth, then get in touch.

We’ve got a number of lenders on our panel and would be happy to run you through some options to help secure your business now and into the future.

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