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A report from non-bank lender Prospa has shown that economic pressures are bearing down on Australia’s SMEs, but more are seeking finance.
Research from small business lender Prospa has shown that while small and medium-sized enterprises (SMEs) in Australia are preparing for a busy holiday sales season, more than three in four (76 per cent) are anticipating challenges in this period.
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According to Prospa’s survey, conducted by YouGov, of 503 national businesses with fewer than 50 employees, 77 per cent of SME leaders felt personally impacted by rising costs and almost half (43 per cent) said they’d experienced emotional stress as a result.
Three-quarters expect challenges over the coming months including reduced consumer spending (33 per cent), high operational costs (28 per cent), maintaining product service and sales quality (27 per cent), managing high demand (22 per cent), and shifting consumer preferences (19 per cent).
This came after nearly one in five (18 per cent) operated without a cash reserve during October, down by 4 percentage points compared to six months ago.
The research illustrated a potential opportunity for brokers writing SME finance, too, with an upward trend in the number of SME leaders indicating that they would access finance next year.
According to the report, 26 per cent of SMEs said they intended to seek external funds in 2025, slightly higher than the 23 per cent that said they would do so last year.
Beau Bertoli, Prospa’s chief revenue officer, said Australia’s small-business owners have shown “remarkable resilience” in navigating supply chain disruptions, high inflation, and decreased consumer spending.
“It’s encouraging to see small businesses building up their cash reserves despite having to battle the harshest economic conditions since the GFC,” Bertoli said.
“This progress shows resilience, determination, and most importantly – hope.”
Tough times for SMEs
Bertoli commented on SME cash flow challenges in a recent article that appeared in The Broker’s Guide to Commercial Finance, The Adviser’s supplement magazine.
“The current economic conditions are such that small businesses are getting further away from the three to six months’ cash reserves recommended to cover operating expenses,” Bertoli said.
“We’re seeing a particular strain on the retail and hospitality industries, which have been disproportionately impacted by a decrease in discretionary spending, supply chain cost increases and rising fuel and energy expenses.”
Jon Sutton, CEO of non-bank ScotPac, also shared his thoughts on the cash flow finance story, encouraging brokers to be mindful of their SME clients during this difficult period.
“The Australian economy is built on the back of SMEs,” Sutton said.
“We have some very large, extraordinarily large companies in the economy. But the real blood flow of the Australian economy is down to the small-business owners that are supporting industry across the various sectors of the economy.
“We really need the SME sector to be firing on all cylinders.”
The SME lender has been rolling out new tools to help brokers provide SMEs with finance quickly, including the new intelligent quoting tool, Prospa IQ, and has extended the line of credit limit to $500,000 (from $150,000).
[Related: Prospa unveils new quoting tool for brokers]
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