I've got a few young guys who are mechanicly pretty sound in their technique but they are so tight and tense that they can;t develop any flow or react well. Any tips on getting guys to loosen up?
I've found that using focus mitts for everything will help with movement and flow. Holding kicks single handed means they have to really become accurate and place the kicks, not like using big thai pads where you can literally just blast through them.
It may seem like the kicks and combos begin to look a lot more like 'freestyle karate' 'points fighting kickboxing' but my god does it help people. I find big thai pads means big power and big explosion, less finese.
Focus mitts also allow for creativity. For example you could do the following:
Jab, cross *shoulder/slip* cross, left hook to the body, right head kick (pad holder has to take a step back).
Add a lot of slips, bobs & weaves to combos and add random head kicks on the end of things.
I find you can really blend boxing together and make for some pretty combos, less power and craziness but I like it, it's a nice change.
Is it a confidence things some people are tight if they don't feel comfortable with themselves 
I had this problem big time with boxing, and the thing that made the biggest difference was doing really really light drills that progress to really low intensity free sparring. The coach called it catching hands?
It would start with a fixed pattern, like alternating jabbing at each other and eithe catching or slipping the jab, the doing it with jab/crosses, then working in counters, etc etc with increasingly complicated (but still fixed) patterns; like catch the jab, slip the cross and step into a shovel hook as a counter that they pull their arm back and shell up to catch, etc, all while moving around and changing tempo.
Eventually we'd just be free sparring but at like 30% intensity, and it was amazing for me. I dunno if its different for kickboxing, or if it was a personal thing, but for me (and having that problem exactly) this worked perfectly. I went from being super stiff, flinching, going too hard out of fear/anxiety every round, and generally failing to have any flow to still being terrible but at least being able to stay relaxed, move with some semblance of fluidity, and control my own pace and intensity reliably.
I'm garbage at striking of all sorts and have never got past the novice level, but that drill took me from being an awful beginner to a mediocre novice (and I could spar some with the competitive amateurs and lose competitively, instead of getting slapped around like a child fighting a grown man). 
OGstudmuffin - Is it a confidence things some people are tight if they don't feel comfortable with themselvesAnd yeah, was absolutely a confidence thing for me. I would get super nervous before sparring in a way I never have before judo, wrestling, or BJJ, even if I knew I was going to get beat senseless on the mat.