SME growth plans hindered by rising costs


A new survey reveals that 68 per cent of SMEs would need additional or updated assets to grow their business this year but 22 per cent are unable to acquire such resources due to high prices of vehicles and equipment, and 19 per cent expressed concern that they are unable to afford new assets.

The findings come from an independent survey conducted by non-bank commercial asset finance lender Metro.

When asked whether a lack of capital assets was holding their business from expanding, 42 per cent of respondents said they needed more capital assets to grow their business, and 26 per cent said their assets are too old and outdated. 

As for the factors as to why they are unable to acquire new capital assets, the most prevalent reasons were high prices and lack of affordability (41 per cent), cost of equipment and vehicles increasing too much (22 per cent), and the inability to afford capital assets (19 per cent). A further 15 per cent don’t want to invest at present while only 10 per cent of respondents said they don’t want to get a loan to cover the costs of new assets, and just three per cent said they can’t get loan approval.

“The fact that only a small number of businesses have been unable to get a loan corroborates recent experiences reported by our brokers: most prime asset borrowers are being approved for the loans they are seeking,” Metro’s CEO Phillip Crossman commented on the results. “However, it’s clear that Australian SMEs are conscious of spending in this environment and are wary of rising costs. If we want the business sector to continue to expand, they need the financial support to do so.”

The report also noted that small-sized businesses (16-50 employees) and medium-sized businesses (51-200 employees) are more likely to need updated capital assets to expand their business, with 85 per cent reporting so. Meanwhile, 65 per cent of large businesses (over 200 employees) and 52 per cent of micro-businesses (1-15 employees).

The report also pointed out that the results don’t necessarily reflect businesses can’t afford price increases, as only nine per cent of medium and large businesses and 13 per cent of small businesses said this is what is holding them back. Yet, for 29 per cent of micro-businesses, this is a major concern.

“Micro businesses, when compared to the other business sizes, are more likely to have a tighter cashflow that struggles to accommodate the rising costs of vehicles and equipment,” Crossman said. “Whereas larger-sized businesses have a greater ability to control their cash flow and absorb these higher costs.”

The report further highlighted that most businesses are hoping to expand, with only five per cent admitting that their lack of growth aspirations is the reason they did not need asset finance.

“The data released is largely positive with most businesses intending to expand or grow, and no major issues reported in securing financing for assets,” Crossman explained. “However, it is clear many businesses, especially micro-businesses, are feeling a level of anxiety about the economic outlook. Understandably, businesses have different challenges, depending on their market, but having access to the right equipment for the business to run smoothly shouldn’t be one of them, when there are appropriate finance options available.”