The Future of European Small Businesses: The Growing Concerns
Small businesses or SMEs make a huge contribution to the UK economy to the point that they are considered a backbone of the UK economy. However, just like any other business, they encounter all manner of challenges.
What are these issues? Well, at the top of their list is access to business funding. This is according to a recent study that focused on SMEs in Europe. In addition, the study revealed that many banks simply don't have the solutions desperately needed by small businesses.
Even for those that managed to secure a loan, they reported the process to be cumbersome, time-consuming, and inflexible factors that are crucial to any business' success, not to mention the attention it diverts from the daily activities.
Wait! There's more. Take a look at the issues that are causing sleepless nights for small business owners in Europe.
1. Brexit Uncertainty
The Brexit uncertainty, without a doubt, is a major concern for small business owners. In fact, according to a survey by YouGov, at least a third (39%) of business owners feel that the Brexit move will be detrimental to their businesses.
Many of them, however, feel that no option will make them worse or better off. A minority, 10%, say they'll be better off. Going back to the 39%, this is a huge number considering that the UK economy relies on small businesses for its growth. To be specific, they contribute 99.3% of the total private sector businesses in the country.
It comes as a relief that a majority of the businesses don't fear Brexit. However, the fact that 39% share their concerns about their post-Brexit business is worrying.
2. Small Business Funding
Small businesses may have a huge dominance in the UK and the larger European market, but banks continue to deny or reduce crucial funding to many of them. The 2008 financial crisis played a major role in this reduced funding.
As expected, this continues to cause panic among small businesses regarding future expansion plans. With such concerns and the unsustainability of traditional lending, many small businesses are turning their attention to alternative sources of funding.
While this is an excellent move, many business owners don't have the necessary information regarding alternative lending sources. Alternative lenders may not be in the picture for these businesses, but they are providing much-needed funds to many small businesses.
You're looking at invoice financing, credit cards, and term loans up to 90 days. Non-bank lenders are the go-to institutions for such services. Thanks to the financial crisis in 2008, alternative lenders filled the gap left by banks by offering loans within a short period of applying.
This is attributed to the advanced technology used in decision-making, stellar customer care, and transparency in pricing. This is different from banks that often take weeks or even months to disburse funds. Alternative lenders reduce the waiting time dramatically to a few hours or days.
Technology is the main driver of innovation with these lenders, as they continue to strive to offer their consumers the best services possible. In turn, businesses will benefit from lower operating expenses and easier access to critical information.
With their rising popularity, alternative lenders are constantly opening up new markets across Europe to reach new consumers. With the benefits they offer to small businesses, it'll be easy to embrace new technology.
3. The Turn Toward Technology
Technology is another key concern for small businesses as they forge into the future. According to the same survey (YouGov), it appears that SMEs already know what they need and are ready to embrace new technology.
From the survey, 70% of the respondents said that their businesses had a clear picture of their technological capabilities. Another 26% said inadequate information about technology informed their purchasing decisions.
In the same survey, 58% of respondents expected no movement in technological investments in 2019 while 23% expect a significant rise in investment. Only 8% said they expected a decline. However, according to financial experts, this steady approach to technology is good. However, they add that jumping into tech investments without intense consideration is bound to fail.
While this may be a great move, it appears there may be a bigger reason as to why small businesses aren't adopting new technology as fast as expected. According to the survey, it was clear that associated costs claim the top spot as the barrier to tech adoption.
At least 57% said the price of technology is high while complexity came in at number two with 30% and time constraints was in third place with 31% (numbers exceed 100%, but that's to be expected). There is a huge appetite for technology. In fact, 25% of SMEs expect growth in tech spending going into the future. A mere 8% predict reduced spending.
Some of the key areas in which small businesses are keen to implement technology include inventory, accounting, and productivity. According to a report prepared by the Enterprise Research Centre dubbed The State of Small Business Britain Report 2018, cloud computing is the most common technology used by SMEs with 43%.
Customer relationship management software and e-commerce are the other technologies with 18 and 30 percent respectively. However, the cost of implementing these technologies remains a huge obstacle.
Final Word
With banks tightening the screws on lending requirements, SMEs are finding it increasingly difficult to chart a way forward. Top that with expensive technology that is hard to implement and you can see why business owners are concerned.
That's not all, though. The Brexit uncertainty doesn't seem to provide any relief with the back-and-forth deliberations. However, emerging alternative lending sources are providing much-needed funding, while businesses consider taking a steady approach to tech implementation.