A new survey commissioned by business loan comparison site Small Business Loans Australia reveals that the majority of Australian business owners will be more conservative about borrowing and investing in their businesses next year.
In fact, 90 per cent of businesses will be more cautious about borrowing money, while 69 per cent will hold off on investments such as purchasing equipment or growing their team, due to the economic environment. Only 31 per cent will continue to invest in business going into next year.
In addition, 45 per cent of survey respondents will spend more time sourcing and comparing the best value loan, while 23 per cent will spend more time considering whether to apply for a loan at all. A further 12 per cent have revealed that they have ditched loans after initial enquiries and 10 per cent will seek smaller loans than in previous years.
Medium-sized businesses (businesses with 20-199 employees) are more likely to tighten their budgets in 2024, with 97 per cent aiming to be more conservative with their borrowing next year. This compares with 82 per cent of small businesses (five-19 employees).
Smaller businesses are noted to usually face higher borrowing costs due to lenders regarding them as ‘riskier’ than larger businesses. These higher costs in the current economic climate have put even more pressure on micro-businesses (one-four employees) to source and secure the best deal for them, with the survey revealing 54 per cent of micro-businesses aiming to do so next year.
The research also highlighted that medium-sized businesses are more likely to refrain from investing in their business at 77 per cent, which is nine per cent higher than the rate of all respondents.
“Economic growth in Australia is still below historical trends in the last quarter, so it makes sense that businesses are playing it safe,” Alon Rajic, Founder and Managing Director of Small Business Loans Australia, said. “The cost-of-living and higher interest rates are putting pressure on everyone. Our research has shown that many small to medium businesses – 64 per cent – have been impacted by late payments, with almost a quarter of business owners struggling to pay themselves and 15 per cent struggling to pay staff. There are a lot of financial pressures in play right now, so many business owners will be waiting to see how the next year pans out before taking on any financial risk.
“There is hope in sight, with the economy proving more resilient at the moment than first expected, and that supports demand for Australian businesses,” Rajic added. “The Federal Budget also put measures in place to support businesses through these tough economic times. The instant asset write-off allowing SMEs to immediately deduct assets is one such measure, and small business energy incentives build on that relief, too.”
