Spike in small and medium businesses seeking cash

“Building the Recovery” - a small business perspective
Interface Financial group sees spike in small and medium businesses seeking cashflow assistance

The government is confident that the budget will greatly assist in economic recovery. Hence the “Building the Recovery” slogan. But have we really begun to recover? Is the recession, in fact, over?

If you look at the macro or headline indicators, then it might appear so, but for many business owners in the small to medium business sector of the economy the picture is far from clear.

The MYOB Business Monitor published in April showed 35% of businesses surveyed reporting falling revenues, and only 26% reporting increases. Of the businesses reporting a decrease, almost half had seen revenue fall by between 20 – 39%. The indicators on profitability show a very similar trend.

Further evidence of this trend can be drawn from a recent report from credit reporting agency Dun & Bradstreet. In carrying out a risk profile revision for 20,000 companies in the first 3 months of 2010, the agency downgraded 9,000 – an alarming 45%.

D&B’s general manager John Scott said the latest figures provide an important reminder not to underestimate the challenges an economic recovery presents.

“Credit remains tight and the risk aversion practices that financial institutions fine tuned during the crisis look set to continue throughout 2010.”

It is clear that at the business ‘coal face’ real tough challenges still exist and look set to remain for some time. Cash flow as always will be a huge challenge. With banks tightening their criteria and average debtor days still at record levels, the outlook for business unable to rely on continued bank support is daunting.

The Interface Financial Groups’ NZ director Chris Reid explains “we have seen a big jump in the level of new enquiry since January 2010. However, much of that is from companies who do not even qualify for temporary cash flow assistance due to the almost terminal state of their businesses.”

The government measures announced in the budget have been generally well received. However, getting the good news through to the small business sector looks set to be a big challenge.

For more info contact Chris Reid 09 302 7704, or visit www.interfacefinancial.co.nz

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