What's keeping business owners up at night?

Different challenges require different solutions, experts say

What's keeping business owners up at night?


By Mina Martin

There are a number of issues that are keeping small business owners awake at night.

To navigate in the current environment, small business owners have to consider a plethora of issues including inflation, tax obligations, and labour and supply-chain problems – different issues that require different solutions, according to the top leaders at Grow Finance and OnDeck.

According to Equifax, insolvency rates at the total market level increased by +45% in the June quarter, compared to the same period last year, with the construction sector the hardest hit. The latest CreditorWatch Business Risk Index, meanwhile, identified construction and the food and beverage industries as the most-at-risk sectors.

Businesses reliant on discretionary spending are becoming edgy as consumers tighten their purse strings due to inflationary pressures, with Australians reducing their spending on coffee, takeaway food, and restaurants.

Another cause for concern is energy.

An OnDeck survey revealed that 66% of small businesses across Australia are being impacted by surging electricity bills. And according to one in four small businesses, higher power bills are having more of an impact on profitability than rising fuel costs or the increasing cost of trading stock. These costs will likely continue to increase sharply over the next year.

In the latest federal budget, an Energy Price Relief Plan was introduced. This funding, however, will not reach all SMEs. It would be more helpful instead for the government to offer SMEs incentives via bonus tax discounts for electrification and more efficient use of energy, including the availability of a $20,000 instant asset write-off until mid-2024.

“The challenge for small enterprises lies in accessing the funds needed to meet the spending requirements for the tax breaks,” OnDeck CEO Cameron Poolman said.

No matter the industry an SME operates in, they will always need working capital to cope with an uncertain economic outlook.

“Each sector has its own challenges, though the universal pain point for SMEs is cash flow management,” Grow Finance CEO David Verschoor said.

The ACA Sentiment Tracker showed that the need for cash flow and working capital comprised 56% of the demand for additional finance at SMEs. This doesn’t necessarily mean, though, that the general situation of SMEs is worsening.

In fact, the probability of default across all SMEs has plateaued since January, indicating that most Australian businesses are weathering the tightening cycle. To stay afloat in a tougher economy, businesses are forced to become more efficient, which often requires them to invest in new technology and equipment.

“Yes, small businesses are navigating rising costs, inflationary pressures and supply chain issues, but this is driving innovation as enterprises seek to become more efficient and more productive,” Poolman said. “In particular, OnDeck is seeing a trend for small businesses to future-proof their enterprises and realise growth aspirations through investments in new plant and equipment and new technology.”

Grow, too, is seeing demand in this space.

“The company has a broad appetite for new and used equipment, including plant and equipment, scaffolding, attachments for yellow goods – construction and heavy machinery – and many other business-critical assets,” Verschoor said.

In fact, the ACA survey identified funding local growth as SMEs’ second-largest source of demand for additional finance, with 34% of SMEs continuing to forecast growth in their operations over the next year.

“It’s important to recognise that not all businesses are in distress,” Verschoor said. “Many opportunity-seeker businesses are utilising disruption to drive growth through product expansion and market extensions. Businesses continue to diversify their operations and are becoming less reliant on import and offshore manufacturing.”

Some believed, including insurance giant Allianz, that deglobalisation is one long-term influence and key structural driver that contributes to an inflationary economy globally for the next few years.

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