Research from Australian small-business lender Prospa, conducted by RFI Global, has revealed that long-term small-business confidence continues to decline. SMEs see no end to the ongoing cost of living pressures, high interest rates, and high inflation.
Surveyed businesses are pessimistic about the long- and short-term. Only 41 per cent of businesses say they are confident about the future of their business in 12 months. However, a mere 32 per cent are confident about the next five years, while just 29 per cent are confident about the next decade.
Beau Bertoli, co-founder and chief revenue officer at Prospa, offered additional insights on the findings. “While short-term small business confidence saw a modest uptick in June, long-term confidence continues to decline,” he explains.
Cashflow pressures continue
Cashflow pressures continue for small businesses, with 36 per cent saying that they expect business revenue to increase in the next 12 months. 38 per cent expect it to remain the same, while 23 per cent think they will see revenues decline in the next 12 months.
Bertoli commented, “While some businesses, particularly those with high turnover, are managing to find growth opportunities, the overall environment of rising costs, subdued consumer demand and economic uncertainty continues to weigh on small business confidence and sentiment. This data underscores the need for targeted support and policy measures that boost the resilience and sustainability of small businesses, particularly in the most affected industries.
“High inflation and interest rates have strained household budgets and weakened consumer spending, while operating expenses continued to erode profit margins. This impact is being felt disproportionately among small businesses depending on size and turnover. Almost half (47%) of small businesses with a $2M+ turnover expect their revenue to increase in the next 12 months, compared to 30% of small businesses with less than $100k in turnover.”
Stress and burnout disproportionate
The survey also noted that small businesses in the hospitality and construction sector were disproportionately affected by extreme levels of stress and burnout in the current economic climate.
Bertoli expounded, “Two in three small businesses reported experiencing elevated levels of stress and burnout, with cost-of-living challenges and lack of consistent cashflow cited as the most common causes. Certain industries, particularly hospitality and construction, are bearing the brunt of these stressors. Over a third of small businesses in construction (36 per cent) and hospitality (3 per cent) report that they are experiencing extreme levels of stress and burnout.”
He added, “Australia’s hospitality sector has seen a 41 per cent increase in insolvencies as reported by Equifax, reflecting the severe financial pressures and low discretionary spending affecting these businesses. Small businesses are more likely to work extended hours, sacrificing personal and family time to keep their businesses afloat. The data highlights the need for targeted support measures, including education on alternative funding options and mental health support, to build small business resilience.”
Dodging debt
Few businesses are keen to take on new or additional debt to address cashflow issues. Businesses with $2M+ revenue are most likely to increase their amount of debt owed, with 34 per cent saying they will keep debt the same or increase the amount of debt. 27 per cent of businesses with $500k – 2M in revenue said the same, compared to 21 per cent of those making $100 – $500 and 13 per cent of those making less than $100k in revenue. In fact, 66 per cent of small businesses with less than $100k in revenue said they have no current debt or plans to take on debt.
Bertoli concluded, “This cautious approach could reflect their limited access to credit or unwillingness to take on debt in an uncertain economic environment.”
