Small businesses across the UK are experiencing severe cashflow problems on a regular basis, according to new research. A survey carried out by the ICM Group surveyed more than 500 SMEs, with nearly half reporting that cashflow was a major concern.
For UK SMEs, having a healthy cashflow can make the difference between weathering a downturn and going under, a fact clearly reflected in the survey results. Seventy per cent of those interviewed stated that access to a regular supply of cash was crucial to their business, and nearly three in ten said business growth was being held back due to cashflow problems.
Causes and Effects of Cash Shortage
According to the research, nearly one in five of the UK’s small business owners experiences a cash shortage every month. The main reason cited by business owners for cash drying up is because of late or failed payments and, in a separate study carried out by Santander earlier this year, nearly one in four SMEs blamed their cashflow concerns on tardy customers. Other reasons included poor sales, seasonal dips and unforeseen costs that hadn’t been properly budgeted for.
The ICM poll shows cashflow restrictions also cause a knock-on effect for businesses, with around a quarter of those surveyed saying they had to freeze their marketing budgets as a result. The lack of cash also meant suppliers in turn had to wait for their money.
Smaller Businesses Suffer Most
The smaller the business the greater is the likelihood of cashflow shortages, and the more severe its potential consequences. While larger businesses are more able to weather the storm, small businesses and, especially, sole traders suffer disproportionately from lack of access to cash.
These observations are borne out by the ICM survey, which revealed that nine in ten sole traders found themselves up to £5,000 short in cash every month. While eight in ten small businesses were able to keep their cashflow shortage below £10,000 per month, one in ten of those surveyed stated that they had at some point required an extra £30,000 to stay afloat.
SMEs Seek Alternatives
While SMEs are crying out for more flexible and short-term lending plans, many believe traditional lenders are failing to provide what they need. As a result, small business owners are increasingly seeking alternative financing solutions to ease their cashflow concerns.