Survey finds SMEs focused on growth despite Brexit and US Elections
Findings highlight working capital and supplier empowerment trend.
According to an annual survey be financial services firm C2FO, the majority of small and medium sized businesses are more concerned about competition from emerging markets and higher interest rates than the effects of Brexit and the upcoming US presidential elections. Despite these concerns, SMEs are focused on long-term growth and adopting alternative financing options that provide access to working capital.
The survey examined the preferences of more than 1,800 SMEs in the United States and in the UK, Germany, France and Italy (EMEA) for improving working capital efficiency. It gauged respondents' sentiment on trends associated with economic and political factors, financing, working capital deployment and supplier-buyer relationships.
More than 60% of SMEs are concerned with their ability to finance long-term growth.
Cost of Borrowing Remains High
The majority of SMEs (55%) find cash flow as the biggest obstacle for business growth and over 40% indicated an increase in working capital needs compared to last year. Meanwhile, more than a quarter (29%) of respondents have no or limited ability to borrow. This is primarily due to high interest rates and the difficulty in obtaining a loan from a traditional banking partner.
The cost of borrowing for SMEs remains high as only 48% of SMEs indicated that they can get financing at rates below 8%. Borrowing is most expensive in the UK and US as only 42% and 47% of SMEs respectively borrow at a rate below 8% compared to France (52%), Germany (51%) and Italy (58%). In the UK and US, these numbers fell from last year, demonstrating the increasing cost of financing. Those in media, retail/leisure and construction are borrowing at the highest rate compared to other industries.
"The aberrationally low interest rate environment is polarizing the global liquidity imbalance," said Sandy Kemper, Chairman and CEO of C2FO. "Corporates are increasingly being charged to hold deposits, while the banks themselves are struggling with increased regulatory burden that impedes their ability to loan to the SMEs which are such an integral part of the global economy. It is therefore increasingly important for those SMEs to consider alternative financing options that can close this gap and kick-start economic growth."
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