SME business confidence continues steady decline: Prospa
The decline in long-term small business confidence in Australia is set to continue based on research by small business lender Prospa.
Prospa revealed small business confidence is likely to remain low as cost-of-living pressures, high interest rates and high inflation “show no end in sight.”
A survey conducted by RFI Global found small businesses in the hospitality and construction sector are subject to extreme levels of stress and burnout in the current economic climate based on answers from 526 SME’s.
Prospa co-founder and chief revenue officer Beau Bertoli said more needs to be done to help support small businesses that may be struggling.
“Small businesses are more likely to work extended hours, sacrificing personal and family time to keep their businesses afloat,” he said.
“That data highlights the need for targeted support measures, including education on alternative funding options and mental health support, to build small business resilience.”
Key insights from the report reflected a steady decline in long-term confidence, as only 41 per cent of businesses said they are confident about the future of their business over the next 12 months.
This was followed by only 32 per cent of small businesses who said they are confident about the next five years and 29 per cent about the next decade.
Bertoli said it can be expected for those 42 per cent of businesses who have shown signs of confidence, will drop to 32 per cent in the next five years.
“While short-term small business confidence saw a modest uptick in June, long term confidence continues to decline,” he said.
“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.”
According to the survey, 36 per cent of small businesses expect their business revenue to increase over the next 12 months, while 38 per cent believe it will remain stagnant and 23 per cent think it will decline over the next year.
Businesses with more than $2 million in revenue are likely to increase the amount of debt they owe as 34 per cent of businesses said they will increase their debt or keep it at the same level.
Sixty-six per cent of small businesses with less than $100k in revenue said they have no current debt or any future plans to go into debt.
Bertoli said it was an interesting approach for businesses earning more than $2 million to increase their debt but businesses not wanting to take on debt is a reflection of their decreased financial health.
“This cautious approach could reflect their limited access to credit or unwillingness to take on debt in an uncertain economic environment.”
Data from the global small business platform, Xero, also reflected the lack of confidence Australian small businesses are showing.
Xero’s survey consisted of more than 1000 small business owners and decision makers which highlighted 53 per cent are concerned by current economic activity and 41 per cent are experiencing high business costs.
Some of the common challenges small business owners can expect to face in 2025 include managing cash flow during lean periods, managing work-life commitments and chasing payments on time.
Bertoli said based on the influx of data pointing towards the lack of small business confidence, something must be done to support them in their current struggles.
“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.”
