Small businesses struggling with cash flow

Some small businesses are struggling with cash flow and turning to alternative lines of credit to get through the festive season.

Research commissioned by small business lender Prospa indicates half of firms only have three months' worth of cash reserves, while 17 percent have less than one month.

Prospa's managing director Adrienne Begbie said the data showed the economic slowdown had hit hard.

She said some small firms needed a cash fallback and were using alternative lenders when the banks were closed over the holidays.

"Over the Christmas period we see an uplift in our lending for cash flow, especially for our line of credit product. Our line of credit is really popular during this time because they'll take it and then just use it if they have to, so you only pay if you need it but you've got it there.

"The value of the line of credit is support for staffing and especially when you're coming through into January. It's different in the regions and the suburbs, whereas in the cities it can be a lot quieter so it can help them get through that period when they're quiet."

But Begbie said businesses were feeling more optimistic about the future with more than half expecting market conditions to improve in the next year.

"Most of our SME's are expecting it to be better than last summer so it's been a tough period but they are excited and they've got the staff and they're waiting for people to come out."

She said two thirds of small businesses were aware of alternative lending options and almost half have confidence in the delivery of them.

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