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Small-business confidence continues to deteriorate amid elevated interest rates and stubborn inflation.
A report commissioned by small-business lender Prospa has found that long-term confidence among small- to medium-sized enterprises (SMEs) is in a steady decline.
According to the report, 41 per cent (two in five) of businesses feel confident about their business’s future over the next 12 months; however, only 32 per cent are confident about the next five years, while 29 per cent said the same about the next 10 years.
The research was conducted by RFI Global in a survey of 526 small-business leaders across Australia and it found that SMEs in the hospitality and construction sector were “disproportionately affected by extreme levels of stress and burnout in the current economic climate”.
The report also found that cash flow pressures for SMEs persist, with 23 per cent of small businesses expecting revenues to decline over the next 12 months, while 38 per cent expect no change and 36 per cent expect an increase.
Additionally, the size of the business also impacts their willingness to take on debt, according to Prospa.
Businesses with over $2 million in revenue were the most likely to increase their amount of debt owed, with 34 per cent indicating they’ll keep debt the same or increase their debt.
Comparatively, 27 per cent of SMEs with $500,000–$2 million in revenue were prepared to take on more debt, 21 per cent for those with $100,000 and $500,000, and 13 per cent for SMEs with less than $100,000.
Prospa said that 66 per cent of small businesses with less than $100,000 in revenue said they had no current debt or plans to take on debt.
Beau Bertoli, co-founder and chief revenue officer at Prospa, said: “While some businesses, particularly those with high turnover, are managing to find growth opportunities, the overall environment of rising costs, subdued consumer demand and economic uncertainty continues to weigh on small-business confidence and sentiment.
“This data underscores the need for targeted support and policy measures that boost the resilience and sustainability of small businesses, particularly in the most affected industries.
“High inflation and interest rates have strained household budgets and weakened consumer spending, while operating expenses continued to erode profit margins.
“This impact is being felt disproportionately among small businesses depending on size and turnover.”
Bertoli further said that two in three small businesses reported experiencing elevated levels of stress and burnout, with cost-of-living challenges and a lack of consistent cash flow cited as the most common causes.
“Certain industries, particularly hospitality and construction, are bearing the brunt of these stressors. Over a third of small businesses in construction (36 per cent) and hospitality (35 per cent) report that they are experiencing extreme levels of stress and burnout,” he said.
“Australia’s hospitality sector has seen a 41 per cent increase in insolvencies as reported by Equifax, reflecting the severe financial pressures and low discretionary spending affecting these businesses.
“Small businesses are more likely to work extended hours, sacrificing personal and family time to keep their businesses afloat.
“The data highlights the need for targeted support measures, including education on alternative funding options and mental health support, to build small-business resilience.”
[RELATED: Over 1 in 5 SMEs have no cash reserves left: Report]
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