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Small Business News - 14th December 2010

IT & Telecoms SMEs Live "On the Breadline"

One in five (20%) small and medium-sized enterprises in the IT and telecoms industry are living ’on the breadline,’ with only a minimum amount of cash to cover emergencies, according to a study on the UK SME landscape commissioned by GE Capital, one of Europe’s leading providers of working capital and asset based lending.

Figures show that a significant number of the sector’s SMEs would struggle to survive if they faced any immediate or unforeseen situations. Meanwhile, no businesses in the industry (0%) believe that they have a significant cash buffer and lending facilities to have a healthy cash position.

According to the findings, the South West and the North West are the two regions that seem to be struggling most with available cashflow, with a fifth (22% and 20% respectively) of businesses saying they currently have a precarious existence.  Transport and IT & Telecoms are the worst hit sectors, with 27 of transport SME owners, and 20% in IT & Telecoms, admitting they have an insufficient amount of cash to provide a buffer.

John Jenkins, CEO of GE Capital said:

“With so many businesses under pressure due to increased competition, a decline in customer spend and increasing costs of raw materials, it is worrying that so many are not in a position to deal with an emergency should it arise.”

SMEs in IT and telecoms have, however, also revealed that they believe there are opportunities for providing financial assistance available to their business, with three fifths (60%) suggesting that the market for this is either extremely or relatively competitive. Two fifths (40%) of SME owners in the sector believe that greater transparency on charges would help ensure even greater competition and choice for them when looking for funding, either at times of crisis or growth, while three fifths (60%) said that they would like to see better information and advice from alternative sources other than the banks.

John Jenkins added:

“With many SMEs desperately seeking additional funding, it is good to see that there is a strong belief, among small and medium sized firms, that competition does exist in the market. This will clearly serve to help them through times of both growth and of hardship. SMEs and their advisers should be aware of all the funding options available to them to ensure they have sufficient access to cash when they really need it.”

To understand how to better manage your business finances see our business advice article on Cashflow Management.