Confidence is returning among private businesses, but funding remains a challenge and only one in five operators are planning for a return of the good times, according to report at, www.smh.com.au.
These are among the major findings of the latest PricewaterhouseCoopers Private Business barometer, out today, October 20 2009.
Despite a fall in growth, private businesses still managed to outstrip the performance of the general economy by increasing sales by an average of 6.8 per cent and profits by an average of 5.8 per cent, according to the report.
Despite a fall in growth, private businesses still managed to outstrip the performance of the general economy by increasing sales by an average of 6.8 per cent and profits by an average of 5.8 per cent, according to the report.
But private businesses faced much tougher conditions in the past six months, with lenders reviewing the debt facility of more than 61 per cent of businesses, while 45.4 per cent had their loans repriced.
Half of the 758 businesses responding to the survey said banks had been stricter in enforcing debt contract covenants, while 29.3 per cent said their lender had demanded they put up additional security to back up existing debt.
The cost of credit was the main difficulty for 39 per cent of respondents in raising capital, while 23.9 per cent continued to report challenges in finding credit.
A report in The Australian Financial Review today suggests banks are charging smaller businesses almost double the margin larger businesses pay over the official cash rate, and over double the margin charged on home borrowers.
The PricewaterhouseCoopers report said 43.2 per cent of businesses missed their targets because of a lack of serviceable funding, while 81 per cent said difficulties in accessing credit could stop them meeting their targets during the next year.
Nearly one-third (30.7 per cent) claimed the cost of debt could ‘‘cripple’’ their chances of meeting their immediate targets. However, the report noted 20.7 per cent also admitted they were unclear about the main reason they failed to meet their targets. The report comes as analysts suggest borrowers will face further rate rises this year.
In summary, businesses should, and appear to, expect a relatively flat period in the next six months as the peak impact of fiscal policy passes, but with growth re-emerging on a more sustained footing during 2010. Fiscal repair will probably be more a 2011 story.
PricewaterhouseCoopers Partner Gregory Will said the private business sector had benefited from the Australia’s better-than-expected economic performance amidst the global financial crisis, as well as the Federal Government’s stimulus measures. But it now faced challenge of making the changes necessary to take advantage of returning economic growth.
"Many businesses are showing a worrying propensity to sit and wait for growth to happen rather than reposition and restructure their operations to get the best out of a return to stronger demand,’’ he said in the report.
The PricewaterhouseCoopers Private Business barometer is published every six months. It surveys businesses with a turnover of between $10 million and $100 million.
Source: thesmh.com.au
