Results of Hitachi Capital's SME resilience research

A quarter of SMEs are in ‘survival mode’ as personal finances are put at risk

• 27 per cent of SMEs have put investment plans on hold and are in ‘survival mode’

• A third of owners have invested personal funds in their business in the past year

• 57 per cent have not sought additional external finance in the past 12 months

• 42 per cent utilise bank overdraft facilities

One in four (27 per cent) SME business owners do not plan to invest at all over the next 12 months and are in ‘survival mode’, according to research by alternative finance provider, Hitachi Capital Invoice Finance.

The firm’s inaugural SME Resilience Index reveals that business growth and investment is being put under threat by a cautious attitude towards external finance. Of those surveyed, more than half (57 per cent) had not sought any additional external finance in the past year, with 41 per cent utilising existing overdraft facilities and more than a third (34 per cent) of SME owners investing personal funds into the business.

Of those who invested their own money, one in five (19 per cent) have re-mortgaged property to raise the funds required, potentially endangering their own financial health.  

More than half of SME owners were also concerned that the UK’s decision to leave the EU could impede their access to finance, with 59 per cent predicting that it would be more difficult to obtain finance in future.

For many businesses, the preservation of working capital is still a major concern, a third (34 per cent) cite late payment as a problem, and 31 per cent report being paid late by their clients on a regular basis.

Andy Dodd, managing director at Hitachi Capital Invoice Finance, comments:

“Although business confidence has taken a hit following the Brexit vote, SME owners must not allow caution to stall growth opportunities. During times of economic turbulence, cash is king, and disruption to working capital is causing many to resort to a hand-to-mouth existence. Such short-term thinking, however, can cause significant financial instability, and for most, ceasing investment activity is not the answer.

“Astonishingly, for many, personal and business finances remain unnecessarily intertwined. Rather than endangering their personal finances, business owners should take time to examine external funding options such as cash flow finance and other alternative finance options such as peer to peer lending. Exploring these avenues is essential if businesses are to access the funds they need to invest in skilled staff and capital, as well as pursuing new contract opportunities.”

Another area of concern highlighted in the report is business’ exposure to risk and an overreliance on individual clients. Almost a fifth (17 per cent) of SME owners said that a single, large client is responsible for more than half of the company’s turnover. On average, SME owners said that their biggest client is responsible for 26 per cent of the company’s revenue.

Andy Dodd adds:

“The loss of a key customer poses a serious risk to a large proportion of SMEs. To achieve true stability and increase resilience, business leaders must concentrate on diversifying their client roster and unlocking the working capital required to focus on new business generation.”

Access more insight from the research, and what it means for small businesses in a range of sectors and across different regions, via the Hitachi Capital Invoice Finance SME Resilience Index. 

Table of regional statistics

The research

Hitachi Capital Invoice Finance conducted research with 501 UK-based small business owners

About Hitachi Capital Invoice Finance

Hitachi Capital Invoice Finance, a division of Hitachi Capital (UK) PLC, provides cashflow finance solutions to SMEs across a wide range of sectors in the UK, allowing businesses to release cash from unpaid invoices within 24 hours of them being raised, supporting cashflow management and powering UK businesses to meet their growth ambitions. In early 2019, FLi was launched to market, the new industry first all digital application process. This has helped Hitachi Capital Invoice Finance achieve a record number of new clients. The business also provides access to insight and advice through its online cashflow clinic.

Hitachi Capital (UK) PLC is a leading financial services company with over 35 years’ experience in providing innovative finance solutions to enable consumers, SMEs, fleet owners, motor dealers and retailers to grow and prosper. Hitachi Capital (UK) PLC has over 1,500 employees, £5.9bn of net earning assets and over 1.4 million customers across its five business units; Consumer Finance, Vehicle Solutions, Business Finance, Invoice Finance and European Vendor Solutions.

From 1 April 2021 Hitachi Capital (UK) PLC became a wholly owned subsidiary of Mitsubishi HC Capital Inc. strengthening our relationship with one of the world's largest and most diverse financial groups.

Head to our Invoice Finance page to find out how we can help your business and for further industry updates!