Businesses forced to use personal savings to stay afloat
SME owners are being forced to use their personal savings to keep their businesses afloat according to new research.
Infinity Finance Solutions director Sukhi Singh (pictured above left) said the research from business financing company OptiPay came as no surprise to many brokers with SMEs having long battled cash flow issues.
According to the research, the five key issues facing SMEs are lending restrictions, slow-paying customers, rapid expansion, seasonal income, and a lack of customer credit checks.
Singh said no matter what market SMEs operated in they would always face the same hurdles. However, current economic conditions, including interest rate rises, had exasperated cash flow issues for many business operators.
“In our business we deal with a lot of importers, and the Aussie dollar is getting smacked around and this is definitely hurting people and they can’t just pass on this cost willy nilly,” said Singh.
He said the current high cost of fuel was an additional headache for many SMEs.
Singh said compared to two years ago, there are now more lenders on the market willing to provide funds for these smaller operators.
However, he said it was then up to experts to advise their clients on whether it made financial sense to access this money, factoring in how long they would need the funds for, and the interest rates being charged.
“We'll sit down and work out the end number for the client and then see whether it's feasible to go ahead with it or not,” Singh said.
OptiPay CEO Angus Sedgwick (pictured above right) said a smooth and reliable level of working capital was essential to the success of any business and with the current economic challenges it was becoming harder for SMEs to maintain this.
He referred to data from accounting platform Xero which showed one-third of Australian small business owners were unable to pay themselves due to cash flow challenges and 27% have to dip into their personal savings in the face of rising costs.
“Inflation has had a huge impact on cash flow for Australian businesses over the past six months,” Sedgwick said.
“Rising costs and changing consumer behaviour have seen a shrinking profit margin for many businesses putting a strain on working capital but conversely it is also during periods of growth where we see SMEs really struggling with their cashflow.
“It’s important for business owners to realise that profit and cash flow are not the same thing. You can have a profitable business on paper and not have a dollar in the bank.”
He said OptiPay had seen a huge increase in the number of SMEs seeking invoice financing as a way of maintaining their cash flow and enabling growth.
A survey commissioned earlier this year by Small Business Loans Australia of 210 business owners or senior decision-makers across the full SME spectrum – micro, small, medium-sized, as well as larger businesses – found that a staggering 50% of SMEs face daunting obstacles when attempting to access business loans from banks.
Do you think SMEs are finding cash flow a particular problem at the moment or has this always been a challenge for them? Share your thoughts below
