Connaught SME Survey 2022

77% of Connaught SME’s are confident about business prospects over the next 12 months despite considerable challenges ahead – new research from Bibby Financial Services Ireland

• 82% of Connaught SMEs say they are planning to invest in their business over the next year
• 61% of Connaught SME’s use a credit card or overdraft to finance their business – a concerning figure considering this is a high-cost funding option
• Top three concerns for Connaught businesses over next year are energy prices (64%), economic issues due to geo-political events (41%) and staff shortages (36%)
• Top opportunities involve attracting new customers (82%) and taking on new staff (36%)

Just over three quarters (77%) of Connaught SME’s say they are confident about business prospects and opportunities over the next 12 months despite the considerable challenges ahead, according to research conducted by Bibby Financial services Ireland, a leading provider of financial support and funding solutions to Irish SMEs. While this figure is less that the national average of 87%, it still demonstrates a strong sense of optimism among the business community in the region.

The research shows that nearly one third (32%) of SME’s in Connaught expect their turnover to increase over the next year. 45% say their turnover will stay the same while 23% expect a decline in sales. This sentiment is less than the national figures, which show that 54% of all SME’s expect their turnover to increase over the next year, 38% say their turnover will stay the same while only 9% expect a decline in sales.

Of those who say they expect their turnover to increase, 57% say it will increase up to 5% while 14% say it will increase between 6% and 10%. A further 14% also say it will increase between 11% and 20%. Of those who expect their turnover to decrease, 40% say it could potentially decline by between 21% and 30%.

While the results very much demonstrate a stoic resilience amongst the Connaught SME community in the face of significant economic volatility, the business community in the region seems to be more cautious in their outlook when compared to the national outlook.

When it comes to investment plans, 82% of SMEs in Connaught say they are planning to invest in their business over the coming 12 months, with just 7% saying they have no plans to invest. The top three key areas for investment are:

• Staff recruitment (50% - well ahead of the national figure of 36%)
• Digital Technology and IT (23% - slightly behind the national figure of 26%)
• More renewable energy options (27% - ahead of the national figure of 24%, possibly due to the fact that the western seaboard has vast potential to generate renewable energy and could be perceived as a big opportunity for the region)

Among the challenges and concerns noted, energy prices (64% - higher than the national figure of 53%), economic issues due to geo-political events (41% - slightly lower than the national figure of 45%) and staff shortages (36% - just ahead of the national figure of 33%) are stated as the top three concerns for Connaught businesses.

That said, SME resilience shone through when asked about opportunities in the year ahead. Attracting new customers (82% - well ahead of the national figure of 69%) and taking on new staff (36% - on a par with the national figure of 37%) were seen as the two biggest opportunities for Connaught SMEs in the next 12 months. Following that, 18% say trading internationally is an opportunity (compared to 23% nationally), negotiating with existing suppliers (18% - compared to 24% nationally) and less competition (18% - compared to 20% nationally) were cited. 5% said Mergers and Acquisition activity is a prospect for them, compared to a national figure of 12%.

When it comes to financing their business, 77% of Connaught SMEs surveyed by Bibby Financial Services say they use a form of external business finance. Among the most popular forms of financing are:

• Business loans (41% - compared to 38% nationally)
• Credit cards (32% - slightly ahead of the national average of 30%)
• Overdrafts (29% - slightly ahead of the national average of 26%)
• Private equity (27% - on a par with the national figure)
• Invoice Finance (14% - slightly behind the national average of 16%)

Managing the risk of a customer non-payment / bad debt is the top financing issue for nearly one third of Connaught SMEs (32%), followed by chasing unpaid invoices from customers (27%) and being able to fund new or larger contracts until you get paid from them (27%).

Carmel Mulroe, Business Development Manager at Bibby Financial Services Ireland, says the high rate of usage of credit cards and overdrafts to fund businesses in the west is extremely concerning:

“Given the fact that business loans, credit cards and overdrafts require a business to take on even more debt – at a time when they don’t need it - SME’s should be considering more sustainable and long term solutions such as Invoice Finance, a facility that offers businesses access to money outstanding from their unpaid invoices, helping them to access income they have already earned but not yet received.

Unlike a loan, credit card or overdraft, Invoice Finance does not involve ongoing monthly repayments. This revolving credit option means that once your invoices are paid, you can just continue the cycle – upload your invoices, draw down, use the funds and simply repeat. In addition to assisting with cashflow, it’s worth noting that the capital unlocked from your Invoice Finance facility can be used anywhere. This could include training, staff salaries, equipment supplies and premises, as well as growth scenarios such as Mergers and Acquisition activity.

Other interesting survey results from the Bibby Financial Services Ireland research include the fact that 41% of Connaught SME’s say the level of finance available is a key attribute they consider when choosing a finance provider, while 36% say a ‘relationship-based approach’ is important, with 27% stating that the ability to apply online is important.

Of Connaught SME’s who have had to open a new business account due to the imminent departure of KBC and Ulster Bank, a significant 80% said their business incurred significant fees in the process, while other issues cited were the fact that it was hard to find a ‘human’ to talk to discuss their issues (20%), while changing technology was cited as difficult as they had to use different apps (20%). A further one fifth said that they had to reapply for an overdraft, which was time consuming and caused cashflow problems.

Carmel Mulroe, who has worked closely with businesses in the Connaught for a number of years, added:

“Having worked as a business manager with Ulster Bank I am acutely aware of the challenges faced by SMEs in accessing cashflow and now having to switch banking providers in some cases. Although the departure of a number of banks has further complicated an ever-complex banking landscape in Ireland, I would advise SME’s to kick into action now to ensure the transition is as smooth as possible, and also use the time to review the wide range of financial options available to them to fund their business.

One of the biggest issues for Irish companies switching back accounts is the impact it will have on their overdraft facility. Many businesses don’t realise that they won’t be allowed to simply switch their overdraft facility to their new provider. This application process could take months in some cases, so it’s important to plan how you are going to fund your business in the meantime It could also be a good time to review if invoice financing is a better alternative to overdraft facilities. For example, you may have a €100k overdraft secured against a €400k receivables book, but a switch to Invoice Discounting could result in a three times higher access facility.

SMEs need professional support now more than ever and I am on the ground to offer this support and match a cashflow solution with their needs. It’s important, however, to acknowledge the resilience of SMEs in the West, Northwest and their ability to adapt and change - coupled with the wide-ranging support available from the private and public sectors – and hopefully this will fuel SMEs in Connaught who continue to play a pivotal role in Ireland’s overall economic solidarity over the coming months.”