Half of SMEs still ineligible for financing in 2018

Poor cash flow and low annual revenue stall their opportunities.

Although SMEs had better access to the necessary capital to finance their business in 2018, there is little to low improvement amongst the number of SMEs who remain ineligible for financing. Business consultancy firm Linkflow Capital found that only 34% of SMEs were eligible indicatively for financing last year although this marks an improvement from 19% in 2017.

Also read: 4 in 5 SMEs fail in financing assessments

The firm’s findings attributed SMEs’ improved eligibility to financing schemes, such as the SME Working Capital Loan, and healthy domestic economic growth in 2018. The report also noted that alternative lending options, such as P2P crowdfunding platforms, gave credit-short SMEs access to the necessary loans.

However, more than half of SMEs may be unable to secure financing due to poor cash flow and small annual revenue. In 2018, half of SMEs declared an annual revenue of less than $300,000 and less than $10,000 average cash balances. There is little improvement from the 52% of SMEs who declared the same amount of revenue in 2017.

A separate survey by Experian notes that 34% of SMEs admitted to facing external finance-related challenges and 44% admitted to facing internal difficulties in managing their finances. 

Also read: SMEs expect 15% lower turnover amidst challenging business environment: report

On the other hand, SMEs’ profitability improved with only 19% of users indicating financial loss during the survey period, lower than the 55% of users indicating loss-making in 2017.

Linkflow Capital also noted a rise in startups seeking financing. Around 26% of users are businesses less than a year old, compared to 21% in 2017.

The report used data from 2,771 unique users of the firm’s SME loan comparison portal, retrieved from January to December 2018.