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Small business loan borrowers are not out of the woods yet as profits remain under pressure now and for some time to come, according to the latest survey from Lloyds TSB Commercial.

The report shows that firms are hopeful of an increase in sales and orders by the end of 2009 but indicates that, without the ability to raise prices, profits will continue to fall for many. In addition, the survey highlights that investment and recruitment plans are still being scaled back.

And despite the fresh hopes for sales and orders, profits are likely to remain under real pressure for most firms – a fifth expect profits to climb, while almost two fifths believe they will tumble and the other two fifths think profits will remain stable.

A third of companies reported cash-flow problems to Lloyds TSB – marginally higher than the level recorded in the survey six months ago, with late payments by customers and weak demand remaining the main causes. These constraints on profitability and liquidity will take an inevitable toll on firms' investment plans for the rest of the year.

John Maltby, managing director, Lloyds TSB Commercial says: "A major factor in the dramatic fall into recession has been plummeting business confidence – and restored confidence is the key to any recovery. So this evidence that firms are regaining faith in their business prospects is good news.

"But the survey indicates a levelling off in the downturn, rather than a return to strong growth. For the time being, profits will remain under pressure and investment will be on the backburner. And that means businesses will need support in order to ensure the momentum of any recovery."

Confidence is everything. So talk to a financial adviser about what you can do now, and in the future, to improve your confidence in your small business.

SOURCE: Lloyds TSB Commercial, 14/07/09

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