Small and medium sized enterprises business expectations have improved in all industries, but the outlook is still weak. The barometer balance figure for economic expectations is -8. This means that there are more small and medium sized businesses that are preparing for a more difficult situation than those who expect a cyclical improvement.
The international financial crisis turned into a crisis in the real economy a year ago. This crisis affected Finnish SME business activities quickly, especially those who were active in industry and construction industry.
Profitability is on trial, but they are keeping the staff
It takes time to adjust to the economic situation, and individuals do not trust a new rapid growth. For these reasons, only 23 percent of SME companies expect to improve their profitability over the next 12 months.
- Changes in business environment are progressing at different rates in different industries. This becomes the trade's profitability conditions, which have fallen below industry expectations. Positive is that service firms' profitability expectations have risen.
Even small businesses, which employ less than 10 people, expect that their staff number remains unchanged in these times, the most positive results of the barometer, summarizes the chief economist Timo Lindholm from the Federation of Finnish Enterprises.
Operating Capital and conjunction loans needed
Approximately one quarter of the SME-business intentions are to seek external funding over the next 12 months. The proportion is slightly smaller than the barometer in the spring. Funding is needed in particular to the operation of capital.
Banks' share as a source of external finance planning has been reduced from the last barometer and Finnvera's share has risen.
- This has been seen in the demand for Finnvera domestic financing. Until the end of August, the Euro-rate demand was over 44 percent higher than during the corresponding period a year ago. Finance Application numbers should be kept at a high level also during the end of the year, especially regarding the cyclical financing, says Finnveras CEO Pauli Heikkilä.
SME-businesses evaluation of funding has changed so that the estimate of market financiers, mostly banks, have deteriorated and the estimate of public funding has risen. For the first time, public funders receive a better estimate by the SME-businesses than commercial financiers.
- This should reflect the perceived stringency of the availability of loans and the perceived severity of the conditions of the loan. More and more small to medium sized businesses have experienced that the financial market situation has affected the ability to obtain financing.
The requirements for collaterals have become stricter and the general availability of loans has become more difficult from the beginning of the year, notes Finnveras CEO Pauli Heikkilä.
One third of SME businesses that have taken loans have had to resort to the balancing of their loans, such as deferment of abbreviations or extension of loan period. Over half of those who tried balancing have succeeded in reaching agreement on balancing measures with the main funder, without additional requirements.
Only in 5 percent of cases, the financier has denied balancing entirely. In about one in five applications for balancing the financier has demanded increase in the margins. Additional security has been requested by about 10 percent of SME companies applying for balancing.
Payment problems have increased
The economic crisis has strengthened SME-business solvency. Difficulties with the management of their payments have increased, along with the delay in payment of other companies and consumers.
- Normally, only a few percent of SME-businesses experience payment difficulties in their own operations. Now, 17 percent indicates that they have experienced problems with the management of payments in the last three months. Payment difficulties is a major problem in the industry. The difficulties are also more general on average in the smallest companies, says economist Harri Hietala from the Federation of Finnish Enterprises. More than half of SME-enterprises have encountered delays of payments from customers or business partners over the past three months.
The slowing of incoming payments has been more general in industry and commerce companies. The problem is accentuated by large enterprises that employ over 50 people and in the most growth-oriented SME companies. Out of these companies two-thirds reported that payments from customers and other companies has been delayed.
Cecilia Helland