New research from online small business lender Prospa reveals that small businesses outside Australia’s capital cities are at risk financially, with one-third of them rating their overall business health as ‘poor’.
The latest SME Sentiment Report also highlighted the growing concerns among small businesses about their business viability heading into the holiday period, and a yawning financial gap between metropolitan and regional businesses due to economic pressures.
“The data underscores the disproportionate impact on businesses based outside of major metro areas, particularly concerning stark increases to goods and services costs,” Beau Bertoli, co-founder and Chief Revenue Officer at Prospa, said. “On top of ongoing labour shortages and soaring energy bills, the upcoming closure of postal branches in some regional areas could add to inflationary pressures. As a result, nearly nine in ten regional small businesses have shared with us that they have concerns going into the holiday period.”
The report noted that regional businesses are more likely than capital city-based businesses to say they are worried about the rising cost of goods or services (73 per cent compared to 64 per cent). In addition, 43 per cent of regional businesses do not feel optimistic about the economic outlook for the next 12 months.
Meanwhile, 86 per cent of small businesses face mounting worries as they gear up for the seasonal rush, among them being the rising cost of goods or services (58 per cent), rising cost of utilities (48 per cent) and lower-than-expected consumer spending (36 per cent). Compounding this is the recent rate rise by the Reserve Bank Australia, prompting many small businesses to forecast this could further dampen consumer confidence and spending, particularly in the retail and hospitality sectors.
With inflation figures continuing to hang heavy over small businesses and as late payment times averaged over three weeks in September, the need for financial support is growing, with 53 per cent of Australian small businesses having sourced business funding from a traditional bank in the past and 48 per cent saying the process was slow, highlighting the need for increased education around faster and more accessible alternative finance solutions.
Because of these anticipated challenges, nearly a quarter of Australia’s small businesses are preparing to access funds, averaging $24,903 among those expecting to do so in the next 12 months. On a national scale, this is equal to 524,000 small businesses with a collective borrowing power of AUD $13.0 billion on average, all being channelled into the local economy.
The report further reveals that 66 per cent would make changes to their business now if they had the funds. Among these respondents, the top three changes include adopting new technologies to improve efficiencies and customer service (52 per cent and 43 per cent respectively) and adapting operations to support growth (39 per cent). Other priorities include hiring to bring in new skills (30 per cent), providing training to increase skills in the team (28 per cent), and updating operations to solve existing problems (23 per cent).
“Lack of access and awareness of fast and affordable funding solutions is stunting the ability of small businesses to make necessary changes or investments to their business to grow and thrive,” Bertoli said. “As talent shortages, inflationary pressures and supply chain delays persist in the coming months, it is vital that small businesses know the different funding options available to them to maintain a steady cashflow.”
