Tuesday, June 18, 2024

Regional small business health ‘poor’ as inflationary pressures mount

Small businesses outside of Australia’s capital cities are slated to be hit financially, according to new research from Prospa, with a third of respondents rating their overall business health in the current landscape as ‘poor’.

The findings come from the latest ‘SME Sentiment Report’ conducted by YouGov and commissioned by Prospa which surveyed around 500 small business owners and primary decision makers across Australia.

“The data underscores the disproportionate impact on businesses based outside of major metro areas, particularly concerning stark increases to goods and services costs,” says Prospa co-founder and Chief Revenue Officer Beau Bertoli.

“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 10 regional small businesses [surveyed] have shared with us that they have concerns going into the holiday period.”

Among those businesses who have concerns going into the holiday period, surveyed regional businesses are ‘more likely’ than capital city-based businesses to say they are worried about the rising cost of goods or services (73% compared to 64%).

Additionally, over two in five (43%) of the regional businesses surveyed say they don’t feel optimistic about the economic outlook for the next 12 months.

When comparing outlook between metro and regional businesses on a state level, Queensland is a prime example of a clear divide. While three quarters (74%) of the Brisbane-based businesses surveyed feel ‘extremely optimistic’ or ‘somewhat optimistic’ about the economic outlook for the next 12 months, under half (47%) of the regional businesses surveyed in Queensland feel the same.

Funding

While over half (53%) of Australian small businesses have sourced business funding from a traditional bank in the past, around the same amount among these respondents (48%) say the process was slow. Prospa believes this highlights the need for increased education around faster and more accessible alternative finance solutions.

Nearly a quarter of the small businesses surveyed 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 $13 billion on average, all being channelled into the local economy.

The report further reveals that two in three (66%) respondents 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% and 43% respectively) and adapting operations to support growth (39%). Other priorities include hiring to bring in new skills (30%), providing training to increase skills in the team (28%), and updating operations to solve existing problems (23%).

“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,” says Mr Bertoli.

“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 cash flow.”

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