High costs and late payments are the two most pressing problems hounding small enterprises, according to the results of a business survey.
Eight per cent said political uncertainty was to blame for their decision to stave off investment plans
Bureaucracy, often cited as a bogeyman for businesses, ranked fourth.
The survey was carried out by the Chamber of Small and Medium Enterprises – GRTU, and published on Friday during the Enterprise Consultative Council chaired by Small Business Minister Jason Azzopardi.
The results show that 20 per cent of small and medium companies identified “high business costs” and 19 per cent “late payments” as the most pressing problems today.
Increased competition and bureaucracy were identified as pressing problems by 17 per cent and 13 per cent of respondents respectively while another 10 per cent said “keeping up with laws” was proving to be a problem.
Almost half of the companies polled – 48 per cent – said businesses were the most frequent late payers. Customers were identified as main culprits by 43 per cent of respondents while nine per cent said government was the most frequent cause for the late payments experienced by their company.
Asked whether they planned to make any type of business investment this year, 56 per cent answered ‘Yes’ and almost half – 48 per cent – of these would be tapping their own funds or profits for the required investment capital.
Banks were identified by 46 per cent of companies as a major source of capital financing for their investment plans.
Only six per cent of companies said they would be tapping other funding sources to raise the capital needed for further investment.
High business costs were given as the primary reason for not investing in 2012 by those who said they had no expansion plans. The EU’s negative economic outlook was mentioned by 15 per cent while 12 per cent said too much domestic competition had put them off investing.
Eight per cent said political uncertainty was to blame for their decision to stave off investment plans.
The survey also found that although 60 per cent of businesses were aware of schemes that helped them obtain bank finance through lower collateral and guarantees, only 18 per cent made use of these schemes.
Commenting on the findings, GRTU director general Vince Farrugia said the organisation was conducting a more detailed study to identify the business costs that were a burden on companies.
“We do know that bureaucracy and administrative burdens carry a cost factor of between 2.5 per cent for large firms and 14 per cent for micro firms,” Mr Farrugia said, putting his finger on one of the myriad issues.
He also noted that the cost of financing from commercial banks was “excessive” and lambasted the financial services regulator for doing “practically nothing” to cause the banks to reduce their charges.
This is one reason, he added, why the GRTU was in favour of government-sponsored schemes such as Micro Invest and Micro Credit that helped enterprises reduce their cost of financing.
Another escalating problem is the cost of credit imposed by late payments, which according to Mr Farrugia has become endemic and continues to grow. The cost of utilities was also high while labour costs, especially skilled labour, had gone up and was not matched to productivity, Mr Farrugia said. He blamed this primarily on a shortage of labour.
But the bane of many traders was competition from individuals or businesses involved in illicit trading. These competitors avoided regulation and taxes, he added, while companies abiding by the laws carried the excessive costs of regulation.
Mr Farrugia said companies had to contend with excessive costs arising from the inefficiencies in the whole distribution network, from shipping to air cargo to internal travel costs.
ksansone@timesofmalta.com
Investment fuelled by banks
While the GRTU survey confirmed the important role of banks, 52 per cent of respondents said they did not find it easy to obtain bank finance.
The principle problem businesses face when dealing with banks is that too many guarantees – identified as a problem by 23 per cent of companies – are requested before finance is approved.
Another 10 per cent of respondents said the collateral asked by the banks to secure loans was too high while 16 per cent said interest rates were too high. Hidden fees and legal fees were each mentioned by 10 per cent of respondents as problems they encountered when seeking bank finance.
However, despite the apparent difficulty to access bank finance, only 14 per cent of companies admitted ever having been refused financing for their business. The principle form of bank financing sought by companies is overdrafts (38 per cent), followed by loans (25 per cent) and credit cards (17 per cent). A rank order to establish the “best bank for financing needs” found that Bank of Valletta was chosen by 44 per cent of companies, while HSBC came in second with 32 per cent. Church bank APS was chosen by nine per cent of respondents while Banif and Lombard banks were each chosen by five per cent of companies as the best banks for financing needs.