Cash flow ‘a barrier to growth’ for small firms

Small firms and sole traders see cash flow problems as one of their biggest barriers to growth, according to the 2014 Albion Ventures Growth Report. Red tape still ranks top, as it did last year, but its share of businesses’ concerns has fallen, and only around 26% of firms now cite it as a problemRead More

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Small firms and sole traders see cash flow problems as one of their biggest barriers to growth, according to the 2014 Albion Ventures Growth Report.


Red tape still ranks top, as it did last year, but its share of businesses’ concerns has fallen, and only around 26% of firms now cite it as a problem at all, down from 29% in 2013.

Cash flow is on the radars of around a fifth (21%) of all companies who cite it as a ‘major challenge’, including 12% of firms with more than 50 employees, but a much higher 25% of sole traders.

Interestingly, while cash flow ranks second, access to finance is now down in fifth place on the list of businesses’ biggest concerns.

However, it is worth noting that fewer firms are actually trying to access finance – so it could be a case of ‘don’t need’ rather than one of ‘needs being met’.

Patrick Reeve, managing partner at Albion Ventures, wrote in the report’s introduction: “Red tape remains the largest single barrier to growth, but concern over managing cash flow is a close second.

“Interestingly, this is seen as a problem of success rather than of failure, with cash-hungry sectors, such as production, both more optimistic about prospects and more concerned about the implications of growth on short-term funding than other industries.”

He added that optimistic firms tend to be more likely to recognise their own shortcomings and take action to resolve them – for example, investing in business mentoring, new management expertise and setting loftier ambitions.

By contrast, pessimistic firms tend to blame factors outside of their control, such as red tape and regulatory change, as having an unavoidable impact on their business’s likelihood of future success.

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