SMEs believe that the worst of the recession is over: Survey

The study shows that while most small and medium enterprises, or SMEs, believed the worst of the recession was over, there was an unexpectedly high number of businesses — between 31 per cent and 54 per cent in each country including those which have seen high growth and were less affected by the global downturn — who felt they did not have adequate cash reserves to survive another financial crisis. The study was conducted by Forbes Insights in association with the Association of Chartered Certified Accountants, or ACCA, Certified General Accountants Association of Canada and CNDCEC, the professional body for certified accountants in Italy. The study surveyed more than 1,750 SMEs, with 30 per cent of the sample micro businesses employing fewer than 10 people.

SMEs surveyed said the recession has forced them to become better businesses and if they take on risk it is only where they can have control. Growing businesses, especially in the more dynamic economies, appear to be facing stiffer competition and rising costs, putting profit margins under pressure.

According to respondents, lenders appear to be directing funds to larger SMEs and big corporations rather than micro and small enterprises. The study also found that credit is being directed away from working capital towards capacity building investments and is increasingly likely to be secured against personal or business assets, while equity investments are drawn to acquisitions.

“It has been a challenging two years for small businesses around the world but they have emerged, on the whole, somewhat wiser, more in control and cautiously optimistic. However the recovery, such as it is, presents its own unique risks. As this research demonstrates, having the tools, the support and the confidence to navigate these risks can make all the difference between continued growth and stagnation for small businesses,” ACCA CEO Helen Brand said.

“Although there are signs of economic recovery, the SME sector is not out of the woods yet,” says Anthony Ariganello, President and CEO of CGA-Canada. “We believe it’s vitally important to understand the issues faced by this sector — and having taken an in-depth look at the current situation — it’s clear there are things to be done by policy-makers, by business advisors, by financial institutions and by the businesses themselves.”

“Professionals can play a crucial role in the current financial crisis, supporting SMEs in their decisions concerning financing decisions and business planning. Good budgeting of financial resources and ability to secure third-party capital proves to be key in surviving the crisis,” said Giancarlo Attolini, board member in charge of International Affairs at CNDCEC.

The study has urged SMEs to consider factors such as interest rate increases, exchange rate volatility and inflation when developing business plans and risk management policies. It suggested that governments could help reduce uncertainty through early and reliable commitments on tax, spending, monetary policy and regulation. It urged governments to consider strengthening loan guarantee schemes for SMEs to provide solutions where sufficient collateral cannot be provided.

issacjohn@khaleejtimes.com