Small Business Finance Doom And Gloom

Doom and gloom: Small businesses are facing mountains of cash flow challenges, according to recent research reports. From unclear bank terms for small business customers to rising small business insolvencies due to late payments and even new data on suppliers posing unfair terms on small business clients, the analysis from the past week uncovers a trove of ways small businesses across the globe are struggling to make ends meet.

$5.25 billion is spent by U.K. SMEs on unfair supplier contracts a year, says the Federation of Small Businesses (FSB). The data puts a twist on the issue of late supplier payments, with suppliers of an array of services to small businesses imposing unfair contract terms, according to the FSB. Issues include unclear auto rollover, early termination fees and hidden contract terms written in fine print. Ten percent of businesses were found to have spent thousands of dollars dealing with a single problem from one of their service providers, while 40 percent said they spent $1,300 due to an unfair agreement with a supplier.

$226 million worth of nonperforming loans plagues the Hong Kong market, found data from Bank of East Asia, which only recently reported an increase in bad loans in mainland China, too. According to the bank, the $226 million in bad loans is nearly double what it had on the books by the end of last year, with loans to retailers having the highest instance of loan repayment defaults by corporate borrowers. Reports said it’s not clear how much mainland China has impacted the rise in bad loans in Hong Kong. The figures coincide with similarly bleak outlooks by the Hong Kong Monetary Authority, which saw the percentage of doubtful loan ratios nearly double between data at the end of March and at the end of June.

94.1 days are spent paying SMEs in Malaysia, according to new data from Minister in the nation’s Prime Minister’s Department Datuk Seri Dr. Wee Ka Siong. The figure shows that Malaysia is among the growing list of countries putting focus on the longer payment terms that place cash flow burdens on small businesses. Dr. Wee is reportedly urging businesses to follow Japanese policy, which sees companies paying their suppliers in 30 days or even as quickly as two weeks. According to SME Media Group, 73 percent of small business owners point to the nation’s business culture as the reason behind late B2B payments.

86% of SMEs agree it takes “exceptional” skills to balance personal and work life, and that balance is key to running a successful business. A survey by alternative lender OnDeck said the findings of its Main Street Pulse Report signal a challenge among small business owners to manage their professional and private lives, with entrepreneurs working an average of 69 hours a week.

72% of SMEs don’t know their business credit score, and that means small businesses are in the dark about how they can use their score to expand. That’s according to small business community platform Manta, which released new research along with Nav, which provides small business credit scores. Nearly 60 percent of the companies surveyed admitted that, if they wanted to find out their score, they didn’t even know where to look. According to Nav Head of Market Education Gerri Detweiler, understanding a business credit score is crucial to helping small business owners get approved for financing.

26% of small U.K. firms said they don’t feel supported by their banks, according to Nucleus Commercial Finance. Researchers also found that small businesses are unaware of the terms their financial services providers put on notice periods for their overdrafts. While troubling, the results were not unexpected, according to Nucleus CEO Chirag Shah, who said that banks, while they should be giving clear and timely notice when removing overdrafts for their SMEs, often don’t.

23% of SME insolvencies are the result of late payments for goods or services, says trade body R3. Meanwhile, the failure of a supplier or customer led to the insolvency of a U.K. business in 20 percent of the cases over the last year. R3 President Andrew Tate said there are a few factors behind this trend, be it late or nonpayments to suppliers or a company’s overreliance on a single vendor. According to analysis by R3, the problem has only gotten worse in the last two years, and Tate said federal initiatives to combat the issue don’t seem to be working yet. Estimates peg the financial impact of late payments to suppliers at more than $10.6 billion every year.