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Cash flow woes increase for SMEs

More than one in five SMEs are having cash flow issues due to business loans being rejected, research from Scottish Pacific has found.

Scottish Pacific has released the full report for its September edition of the SME Growth Index, which found that over one in five small-to-medium sized enterprises (SMEs) ran into cash flow issues after being declined business finance.

Commissioned by Scottish Pacific, banking analysts East & Partners surveyed more than 1,000 CEOs and senior staff from Australian businesses with annual revenue of between $1 million-$20 million.

The results highlighted that cash flow was a significant problem for a growing proportion of Australian SMEs, with only 10 per cent of respondents stating they had no cash flow concerns in the past year.

One in five business owners flagged that their business’s cash flow situation had deteriorated over the year, with 12.3 per cent of respondents stating the situation was “worse”, and 7.3 saying it was “significantly worse” than the year previous.


The results show that the percentage of SMEs reporting “significantly worse” cash flow has doubled since March 2018, moving from one in 10, to now one in five.

In addition, fewer SMEs are reporting significantly better cash flow, down from 26.8 per cent in March 2018, to 22.3 per cent in September 2019.

The number of business owners who report their cash flow to be “better” or “significantly better” than the previous year has fallen almost 10 percentage points since September last year, to 59.4 per cent (previously 68.9 per cent).

Almost three-quarters of business owners nominated “government red tape and compliance” as their number one cash flow issue, with a similar proportion of respondents saying they were unable to take on new work due to cash flow problems.

Additionally, 27.8 per cent of SMEs stated they have difficulty meeting tax payments on time, whereas 18 months ago, this figure was 24.8 per cent.

The September index was the first time that business owners were asked if being declined commercial finance has affected their cash flow, with one in five respondents admitting that it had.

Peter Langham, Scottish Pacific CEO, said these results provide opportunities for brokers and financial advisers to step in and assist SMEs in finding the best options to fund their businesses.

“The fact that one in five businesses is struggling with cash flow because they’ve had business funding rejected is a massive wake-up call to SMEs and their advisers to make sure they are funding their business in a way that optimises cash flow,” Mr Langham said.

“A business struggling with cash flow can only stretch working capital so far before something has to give.”

He went on to say: “The impact of poor cash flow on the Australian economy is considerable. East & Partners estimates that this issue costs the SME sector more than $235 billion annually in lost revenue.

“If business owners don’t find new ways to deal with perennial cash flow issues, Australia’s growth potential will continue to be constrained.”

[Related: Asset finance lender welcomes sale to Cerberus]

Cash flow woes increase for SMEs

Hannah Dowling

Hannah Dowling is a journalist for mortgage business, the leading source of news, opinion and strategy for professionals working in the mortgage industry.

Prior to joining the team at Mortgage Business, Hannah worked as a content producer for a podcast catering to property investors. She also spent 6 years working in the real estate sector at a local agency. 

Hannah graduated from Macquarie University with a Bachelor of Media and Journalism. 

You can email Hannah at: This email address is being protected from spambots. You need JavaScript enabled to view it.

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