One in three Irish SMEs are just about breaking even – new research from Bibby Financial Services Ireland

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  • One third (34%) say their business has been rejected for external finance in the past year

 

  • 52% say if they had to find external finance to fund their business, they wouldn’t know where to start, while 42% say they don’t know who to trust for business financial information and advice

 

  • 90% of Irish SMEs say the Government needs to urgently implement a full review of the supports they offer businesses to ensure they are fit for purpose

 

One in three Irish SMEs are just about breaking even (31%) in the current economic landscape, according to new research conducted by Bibby Financial Services Ireland, a leading provider of financial support and funding solutions to Irish SMEs.

In addition, 90% of Irish SMEs say the Government needs to urgently implement a full review of the supports they offer businesses to ensure they are fit for purpose, while 52% say the government is currently doing more to support large foreign direct investment multi-national companies than SMEs.

However, despite the challenges facing SME’s, more than two-thirds (67%) say they expect sales to grow, the majority (91%) are planning to invest in their businesses over the coming months and almost one third (28%) are hoping to recruit in the next six months.

But while the research shows that businesses have the ambition and inspiration to grow their business, they don’t always have the finance required. One third of (34%) SMEs say their business has been rejected for external finance in the past 12 months. This goes up to 77% of businesses that have suffered from bad debt in the last 12 months, demonstrating the impact of bad debt on SMEs’ ability to grow.

Of those that use external finance, 53% say they have experienced their incumbent bank or financier reducing the amount of finance or credit they have made available to them in the past six months. The top reasons given by banks/financiers for reducing finance are:

  • Business now being considered high risk (38%)
  • Inadequate collateral (30%)
  • Business performance (30%)
  • No longer meet financiers credit criteria (28%)
  • Lack of business growth potential (25%)

 

When asked about their preferred source of external finance, 15% of SMEs preferred to utilise Invoice Finance. Given the fact that business loans, credit cards and overdrafts require a business to take on even more debt – at a time when they don’t need it – SMEs should be considering more sustainable and long-term solutions such as Invoice Finance, a facility that offers businesses access to money outstanding from their unpaid invoices, helping them to access income they have already earned but not yet received.

 

In addition to this, 65% of businesses say they wish there was more unbiased and accessible financial advice available online for SMEs, with just over half (52%) saying that if they had to find external finance, they wouldn’t know where to start, and 42% saying they don’t know who to trust for business financial information and advice.

When SMEs are looking for information or advice on their business’s finances, the top places they turn to are:

  • Professional business / financial adviser (44%)
  • Professional network (43%)
  • Google or another search engine (31%)
  • Existing business finance provider (25%)
  • Friends and family (24%)

 

Mark O’Rourke, Managing Director of Bibby Financial Services Ireland, says the results demonstrate that the incoming Government must prioritise investment in SMEs and engage a full assessment of the supports on offer.

“In light of the recent budget and impending general election, we urge the incoming Irish Government to prioritise enhanced access to finance for SMEs, as their measures have done little to quell their concerns. Our recent data reveals some alarming statistics, like just over one in three SMEs barely breaking even and the cost of doing business is dampening their prospects.

“While there are encouraging signs of recovery, the fragile state of many small businesses underscores the urgent need for targeted investment from the Irish Government. Without adequate support, the potential for widespread business closures could spell disaster for the broader economy.

“Streamlining and improving the accessibility of information for SMEs, providing financial supports through grants and subsidies or tax schemes, and government investment in upskilling and mentorship are all ways that the government could work to support businesses.

“It is imperative that the new government takes decisive action in the coming years to safeguard the future of these vital businesses.”

Download full report here.