SME Optimism and Growth are Up

SME Optimism and Growth are Up

Depending which survey you read, between 1/3 and 1/2 of surveyed small to medium enterprises (SMEs) are optimistic about the country’s near term economic future.

In a recent study by insurer Hiscox, about 38% of SMEs are optimistic the economy will continue expanding. Additionally, 37% say their revenues grew during the past year and 47% report growth in their customer base. On the down side, 51% say customers are taking longer to pay up. A fact that always hurts SME profitability.

What Others are Saying

A similar survey conducted by the Finance Monitor came up with different but more encouraging numbers. According to that survey, 51% of businesses have a positive outlook for the future. It also found 44% of SMEs have grown revenues in the past 12 months. These numbers are the highest since the statistics first began in 2011.

Despite a relatively flat market, manufacturers expect things to improve over the next three months. Particularly in the manufacturing and import/export sectors. That’s the finding in an August report by the Confederation of British Industry.

The numbers in that report predict an overall growth rate of 9% in manufacturing orders along with a combined 5% increase in import and export volume.

Anne Leach, head of economic analysis at the CBI, said: “Despite another disappointing quarter for small and medium-sized manufacturers, with output continuing to fall, optimism about the general business situation has risen for the first time since spring last year.”

The Continent’s Continuing Financial Crisis

What continues to bring fear to SMEs is the ongoing financial problems of the European Union. This is particularly true for businesses involved with imports and exports from the continent. Of this group, a mere 13% believe the eurozone economy will improve by the end of the year.

In fact, more and more importers and exporters are shifting their preferred business relationships to other regions, especially North America. This is due to a falling confidence that Europe will reverse the sagging economy any time soon. The survey found a 23% increase in imports from North America.

One-third of respondents to a Western Union survey feared that they would be impacted by the continuing financial crisis in Europe.

SME Growth Financing

On a more positive note, alternative financing is helping grow SMEs due to a lack of confidence that banks will soon be forthcoming with new loans. Besides business angels taking a more active role in helping businesses expand, there are other financing opportunities such as the Community Development Finance Association (CDFA).

The stated goal of CDFA is “helping deprived communities by offering loans and support at an affordable rate to people and businesses that cannot access commercial credit elsewhere. A few of the financing alternatives offered by CDFA include:

  • Asset finance
  • European Investment Bank (EIB) funding
  • Enterprise Finance Guarantee (EFG) funding
  • Export Enterprise Finance Guarantee Scheme (ExEFG)
  • Trade finance
  • Invoice finance

Overall, SMEs appear to be adjusting to the “New Normal”.