Research from business loan comparison site Small Business Loans Australia has shed light on six challenges that SMEs are set to face before the financial year 2025.
This comes as Australian businesses are bracing for tough economic challenges amid growing concerns of a possible recession should interest rates continue to increase, higher cost of labour and less generous tax incentives.
The six challenges ahead for SMEs are as follows:
- Staff shortages – Job vacancies in Australia remain at unprecedented levels since the GFC, with research showing 68 per cent of businesses are still struggling to find suitable staff. Micro businesses are hardest hit, with almost 80 per cent are unable to fill job vacancies. While health and tech industries show some improvement, hospitality, manufacturing, and agriculture sectors continue to face significant challenges, with up to 100 per cent unable to fulfil vacant staff roles.
- Late payments and tighter lending – 30 per cent of SMEs expect difficulties in collecting customer payments and 26 per cent are unable to attract sales. While loan values made to SMEs have increased in recent years, data shows an alarming number have no financial lifeline at all and 50 per cent face daunting obstacles when attempting to access bank loans.
- Paying more for labour – Since July, companies have been paying a higher, 11 per cent rate, for superannuation and a higher minimum wage of $23.23 per hour. Those looking to sponsor migrants will also pay more, with the base salary of sponsored employees lifting to at least $70,000 a year – up from $53,900.
- Ploughing through recession fears and focusing on growth – Despite the many challenges, 48 per cent) of SMEs are expanding this yea even while they believe there is a risk of recession. This is more than twice the proportion of respondents (22 per cent) who focussed on growth in 2022.
- Rising interest rates and bank fees – A survey commissioned by Money Transfer Comparison revealed that eight in 10 Australians believe their banks’ fees are unreasonably high, and two in three are willing to switch to fintech services with competitive fees. SMEs are seen to possibly take advantage of innovations introduced by fintech services such as international transfer, digital credit cards, Buy Now Pay Later (BNPL) options, rewards programs and cashback services.
- Limited asset ‘write-off’ rules – New rules for asset write-offs are only benefitting small businesses starting this financial year. From 6 October 2020 to 30 June 2023, businesses earning up to $5 billion could immediately write off all eligible capital assets without a financial limit while businesses turning over less than $10 million can write off only up to $20,000 per asset. Small businesses with an annual turnover below $10 million can immediately deduct eligible assets under $20,000, used or installed before 1 July 2024.
Alon Rajic, founder and CEO of Small Business Loans Australia, who undertook extensive research for this report, has urged SMEs to acknowledge the hurdles awaiting them.
“A tighter and costlier employee market, rising rates, tougher borrowing criteria, inflation and continued supply chain challenges paint a gloomy picture for the business sector. Business owners must vigilantly stay informed about available resources, changes in government policies, and other opportunities that can help mitigate these challenges and secure the long-term success of their ventures,” Rajic said
He added, “To weather the storms on the horizon, SMEs must keep eye on early warning signs of economic changes and seek innovative ways to tackle challenges while uncovering untapped opportunities that could be their path to success in the years to come.”
