Lack of capital holding SMEs back from realising their full post-pandemic potential

funding, capital

New research shows that while Australian SMEs feel confident about the future and are eager to make the most of the growing consumer demand online, their financial recovery remains at risk due to lack of cashflow and difficulty accessing business finance.

According to the 2021 PayPal Working Capital research, 54 per cent of Australian SMEs experienced loss over the past year, with the greatest impacts felt due to COVID-19 (77 per cent), lack of foot traffic (32 per cent) and lack of online presence (26 per cent).

Despite these challenges, the report noted that 21 per cent managed to break even, 20 per cent experienced some growth, and five per cent experienced significant growth. The 25 per cent of SMEs who managed to grow through the pandemic’s peak in Australia cited higher demand (35 per cent), growth in customer base (36 per cent) and consumer preference for local goods and services (26 per cent) as major growth drivers.

“Australian small businesses have faced a tough year, with many unexpected challenges thrown at them due to COVID-19, Eli Nana, Manager at PayPal Working Capital Australia, said. “Despite the difficult environment, it’s encouraging to see our local businesses head down the road to recovery, particularly with growth driven by Aussies wanting to support local.”

Many Australian SMEs say that cashflow (48 per cent) is one of the greatest challenges facing their business. In addition, 49 per cent stated that their experience in getting business loans ranged from difficult to extremely difficult and only 38 per cent managed to receive positive feedback on their application. Meanwhile, only 10 per cent found it easy or very easy to access financing.

“After the rollercoaster year that Australian small=business owners have just experienced, it’s no surprise that they’re prioritising flexible repayments for business financing,” Nana said.

“While we all hope the next 12 months will be far more stable and predictable than the past 12, it’s clear that businesses will continue to value finance solutions that can adjust to changing business realities in real time, and that can be accessed quickly and easily when they’re needed to help seize sudden opportunities or overcome unexpected challenges.”