Cashflow remains a main concern for successful small and medium-sized business in the UK, according to a report.
Albion Ventures, one of the largest independent venture capital investors in the UK, said one in five – 21 per cent – of SMEs cite cashflow as a major challenge to growth.
According to the 16-page second Albion Growth Report, cashflow concerns are most acute among firms in the cash-hungry production sector. These firms recorded the highest level of business confidence, with 84 per cent predicting growth over the next two years, compared to an average of 62 per cent among all SMEs.
Cashflow concerns are high among companies that expressed confidence in the future and have attempted to raise finance for growth. A third of the businesses polled said they planned to raise finance in the next year. Of these, 27 per cent were targeting capital for business development, while 23 per cent were looking to expand their premises.
Sole traders are particularly sensitive to cashflow problems, with one in four citing cashflow as a major challenge, compared to just 12 per cent among SMEs with over 50 employees.
Regionally, businesses in the South West and Wales were most affected by cashflow.
Cashflow is the second-biggest threat to small businesses achieving higher productivity – behind red tape, a perennial bugbear for companies.
Patrick Reeve, managing partner at Albion Ventures, said: “It is a clear sign of the improving economy that cashflow difficulties were cited by small businesses as a barrier to growth, rather than a threat to survival.
“As a result, cashflow appears to be a problem of success rather than failure, as many businesses find their expansion ambitions become derailed because they cannot maintain a sufficiently healthy cashflow.
“It is, therefore, no surprise that one in three businesses are looking to raise finance over the next 12 months, up from just 10 per cent in the past year.”
Adviser view
Laurence Sanderson, an IFA with Sterling & Law in London, said: “We have noticed a dramatic rise in the number of small businesses using credit cards to fund large purchases; these are normally taken out in order to expand their company. I would always suggest making sure that debt is covered in any insurance plan taken out on the business.”
