SMEs are, by their nature, resilient creatures. A major global survey commissioned by ACCA, and published today, shows just how important that tenacity has been over the past two years – and continues to be – as their ability to access finance has been squeezed.
ACCA, in conjunction with two other international accountancy bodies, CPA Australia and CGA-Canada, commissioned the respected Economist Intelligence Unit (EIU) to carry out a global report on the issues faced by SMEs. The three bodies then worked together to produce policy recommendations based on the EIU's findings.
The EIU study reveals a picture of SMEs battening down the hatches. Banks have not passed on interest rate cuts and executives at SMEs expect lack of funding to be the main constraining factor on their businesses over the next two years. Many are, to preserve cash, postponing investment and focusing on cost reduction.
This lack of investment, which includes staff recruitment, means it will be difficult for them to capitalise on the increase in demand, when it comes. Most of them predict slow improvement in economic conditions in 2010, with a return to some sort of normality in financing by 2011.
But it is also clear that there is a sizeable rump of SMEs facing particular difficulties. 26% said their debt had increased over the past three years and a similar number had refinanced in 2006, just before the slump. These businesses face a tricky time refinancing again in the near future. And 29% are not sure when, if ever, they will be able to access finance in pre-slump levels. So what are their business models looking like now?
It is clear that governments, banks and small business advisers – notably accountants – must all act to help the SME sector through these tough times. Governments can help by putting SMEs to the top of their agenda and produce suitable fiscal incentives, proportionate regulation, and action to boost asset and equity finance – including business angel investment – to provide alternative sources of finance. Banks need to empower their staff to handle SMEs better – and accountants can mediate and, where necessary, advise of other options.
This is the first recession that a new generation of entrepreneurs have faced – and it is a bad one. Yet the resilience of the sector shines through, in all markets of the world. More than half of the SMEs surveyed still expected revenue growth over the next two years. Governments should remember – the SME sector will drive the recovery. Just give it a chance to do so.
ACCA, in conjunction with two other international accountancy bodies, CPA Australia and CGA-Canada, commissioned the respected Economist Intelligence Unit (EIU) to carry out a global report on the issues faced by SMEs. The three bodies then worked together to produce policy recommendations based on the EIU's findings.
The EIU study reveals a picture of SMEs battening down the hatches. Banks have not passed on interest rate cuts and executives at SMEs expect lack of funding to be the main constraining factor on their businesses over the next two years. Many are, to preserve cash, postponing investment and focusing on cost reduction.
This lack of investment, which includes staff recruitment, means it will be difficult for them to capitalise on the increase in demand, when it comes. Most of them predict slow improvement in economic conditions in 2010, with a return to some sort of normality in financing by 2011.
But it is also clear that there is a sizeable rump of SMEs facing particular difficulties. 26% said their debt had increased over the past three years and a similar number had refinanced in 2006, just before the slump. These businesses face a tricky time refinancing again in the near future. And 29% are not sure when, if ever, they will be able to access finance in pre-slump levels. So what are their business models looking like now?
It is clear that governments, banks and small business advisers – notably accountants – must all act to help the SME sector through these tough times. Governments can help by putting SMEs to the top of their agenda and produce suitable fiscal incentives, proportionate regulation, and action to boost asset and equity finance – including business angel investment – to provide alternative sources of finance. Banks need to empower their staff to handle SMEs better – and accountants can mediate and, where necessary, advise of other options.
This is the first recession that a new generation of entrepreneurs have faced – and it is a bad one. Yet the resilience of the sector shines through, in all markets of the world. More than half of the SMEs surveyed still expected revenue growth over the next two years. Governments should remember – the SME sector will drive the recovery. Just give it a chance to do so.
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