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Research commissioned by a small-business lender has revealed the dire situation of cash reserves among the country’s SME community.
New research conducted by YouGov and commissioned by small- to medium-sized enterprise (SME) lender Prospa has revealed the various impacts inflicted on SME owners by high inflation and cost-of-living pressures.
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According to Prospa’s report, over one in five (22 per cent) of SME owners surveyed indicated that their businesses currently have no cash reserves whatsoever, while 18 per cent are reliant on less than a month’s worth of expenses and 21 per cent predicted they would run out of cash reserves in one to two months.
Prospa warned that businesses must prepare financially as the threat of further interest rate increases in 2024 continues to loom.
The research also revealed that 46 per cent of SME owners opted to reduce their own income to keep up with climbing cost-of-living pressures, while 31 per cent have resorted to dipping into their own personal savings.
Overall, 77 per cent of SME owners have stated that they’re feeling a squeeze on their personal finances.
A further 44 per cent noted increased stress or burnout, with 29 per cent stating they’ve had less time to spend with friends and family due to economic hurdles.
Commenting on the findings, Prospa’s general manager of sales & partnerships Roberto Sanz said: “In today’s macro-economic climate where small businesses have little to no cash reserves, gaining fast access to additional funding can be critical to ensuring business continuity and success.
“However, many small-business owners may feel their eligibility for finances is becoming increasingly complex.”
Despite financial struggles in the sector, the report found that SME owners are “proving their resilience” to adverse market conditions through “solutions-first” approaches.
The report found that 77 per cent of business owners and decision-makers said their businesses already have – or are likely to adopt – strategies to combat rising costs over the next year.
Over one in five (21 per cent) of metropolitan-based businesses cited an increased support for tech adoption, while 43 per cent plan on reducing non-essential expenses and 38 per cent are likely to increase their prices over the next 12 months.
“As businesses adapt to the changing climate, they’re increasingly seeking advice from brokers to navigate alternative funding options and gain access to the cash boost they need,” Sanz said.
“By providing tailored and thoughtful solutions to their clients, brokers will enable SMEs to weather the storm and drive profitable growth.”
[RELATED: Insolvencies in the retail sector to increase: CreditorWatch]
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