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Nearly 70 per cent of SMEs that spend money on innovation expect to receive a return on their investment within one year and expect it to make a significant difference to their business.

The July 2014 Bibby Financial Services Barometer shows that more than half of SMEs surveyed are currently focused on innovation in the short to medium term to bolster future growth.

The survey of 800 SMEs shows that one third are committed to innovate in the next year, while a further 21 per cent intend to innovate in the medium term or beyond the 12 months. In total, more than 70 per cent of SMEs say that innovation is important to help them compete against larger competitors.

Technological innovation is key for medium sized business with 67 per cent of respondents saying it is a “high priority”. For smaller businesses with between 5 and 19 employees, product innovation is the top priority with 53 per cent of respondents identifying this as their main concern. For so-called micro businesses with less than five employees, customer acquisition innovation is a top priority.

The survey suggests that SMEs believe that innovation helps them to grow, lift productivity, generate better quality products and increase customer satisfaction.

Managing Director for Bibby Financial Services, Mark Cleaver, said that the latest survey revealed that “SME sentiment has fallen considerably since February and as a result, SMEs are investing more in innovation to improve sales growth”.

“Investing in innovation, such as technology and customer acquisition strategies, can help equalise the playing field between big and small business,” he said.

Businesses believe in the benefits of innovation enough to borrow money to pursue the associated competitive advantages. The survey shows that one in five SMEs intend to seek external financing within the next 12 months to facilitate innovation. Nearly 60 per cent plan to fund innovation internally.

For those seeking external finance, 30 per cent of SMEs will consider a bank loan while 25 per cent will apply for bank overdrafts while more than 20 per cent are willing to sacrifice business profits.

Only last week the University of Wollongong launched a $10 million seed fund to give a boost to Australian start-ups as part of its iAccelerate initiative.

The initiative is geared at helping entrepreneurs who use technology to enable the delivery of scalable services or products that can be globalized.

The university’s partners in the seed fund are Artesian Venture Partners which will manage the fund and PricewaterhouseCoopers (PwC) which helped advise in the structuring of the fund.