Third of SMEs would shut within 6 months without funding

Just over a third of small and medium sized enterprises (SMEs) here say they would go out of business within six months if they did not get additional funding, a new survey has found.

A similar proportion of SMEs said they would either not exist or find it difficult to continue on without Government supports.

“The fact that over a third of small businesses will run out of liquidity within 6 months without any financial aid shows how cashed strapped they are,” said David Broderick, Director of the Small Firms Association.

“One in five small businesses have secured funding from friends and family to cope with rising costs. This is an alarming reality.”

The survey of 476 businesses was carried out in April and May by Amárach on behalf of the Small Firms Association, with 57% of the sample size employing less than ten people and 43% employing between 10 and 50.

Rising business costs were cited as a challenge by 64% of respondents, with 29% saying it was the biggest challenge their business faces.

The next biggest problem was found to be employee or labour costs, referred to by just under half of those who took part, followed by difficulty attracting or retaining skilled staff.

Within the issue of costs, over a quarter said employee/labour costs are the biggest ones their business faces, with 13% pointing to energy, and 10% to insurance.

Eight out of every ten firms said that they have experienced an increase in business costs over the past year, with those costs rising by 16.6% on average.

“With over 80% percent of small businesses experiencing rising costs, this highlights the clear and present threat to the viability small businesses which are the lifeblood of communities across the country,” Mr Broderick said.

The survey also found that nearly half of small firms are managing up to €10,000 in debt, rising to 54% among micro businesses.

Four in every 10 said they have borrowed or taken out a loan in the last two years, with that figure rising to 48% among larger enterprises.

A third said the main reason they had borrowed was to increase working capital, with 28% citing the need to grow or expand their business and a quarter to buy new machinery or equipment.

Of those that did not borrow in the last two years, just over a third said their decision was motivated by a desire not to get into debt.

Three quarters of small firms said they think the Government needs to do more to help SMEs to access financing that they need.

Nearly half of firms surveyed said they feel there are barriers to accessing finance, up from 31% two years ago.

When it came to the Government’s Increased Cost of Business grant, 55% said they had availed of it.

Of those that had not, a quarter said they do not qualify while a fifth do not pay rates.

15% said they have no need for it at the moment and 10% said they did not know enough about it.