Australia’s small to medium-sized companies (SMEs) proceed to battle underneath lingering inflation and cashflow pressures, resulting in round half of them delaying investments in plant, tools and other people.
Banjo Loans SME Compass reveals SME’s proceed to face vital cashflow challenges, with near half (45%) reporting they’ve delayed strategic investments and delay enterprise alternatives previously yr as a result of ongoing uncertainty and a widespread insecurity.
The report highlights that money movement points have disproportionately affected sure industries, with manufacturing (56%), monetary and insurance coverage providers (53%) and humanities and recreation providers (53%) experiencing essentially the most delays in enterprise alternatives as a direct end result.
In response to Banjo Loans CEO Man Callaghan (pictured), this underscores the continuing pressure that SMEs – the engine room of the Australian financial system – are going through as they navigate an unsure financial panorama.
“Money movement stays a important problem for SMEs which highlights the significance of cautious monetary administration to make sure SMEs can proceed to give attention to development and run their companies with out losses on this unsure market.”
However maybe of even larger concern is the influence of the continuing uncertainty and insecurity being felt within the sector. Simply two years in the past, 50% of the SME’s we surveyed seen inflation as a development barrier. Nonetheless, previously 12 months this determine has risen to 65%.”
In response to the SME Compass knowledge, the manufacturing, monetary providers and humanities sectors are feeling the strain greater than most. These industries, typically characterised by longer fee cycles and better upfront prices, have been compelled to make robust selections about which alternatives to prioritise.
The SME Compass report additionally discovered that whereas two-thirds of SMEs had been in a position to meet their money movement forecast targets in 2024, one-in-three (33%) report they’re intently monitoring money movement and spending. Cost phrases have additionally confirmed essential, with greater than half (55%) of SMEs now providing shoppers 30-day phrases.
Regardless of the latest determination to decrease rates of interest, and inspiring indicators of a slowing inflation, the most recent Banjo knowledge reveals inflation continues to be the first problem for SMEs.
Man Callaghan says many SMEs that had beforehand handed on rising prices to prospects have shifted gears into 2025, now prioritising value reductions and operational enhancements to keep away from additional worth hikes.
“Inflation has been a significant hindrance to development for SMEs, as it’s driving up overheads. The SME Compass reveals that 65% of SMEs cite inflation as a main development barrier, with 60% of SMEs saying overheads are the first cause for value changes. In the meantime, 45% have raised costs to fight inflation, although that is down from 49% in 2022 and 47% in 2023,” Callaghan stated.
The report additional reveals that 65% of SME homeowners imagine inflation will proceed to hinder their development in 2025, with this determine unchanged from final yr. Trying forward, 39% of SMEs plan to proceed chopping prices to fight inflation, 36% intend to boost their costs additional and 30% will develop into extra selective with shoppers or gross sales.
Callaghan stated a “greenshoot” within the knowledge was that regardless of these present challenges, 68% of SMEs are on observe to realize their development targets within the coming yr. Of people who met targets, 70% centered on vital product enhancements, and 66% invested in new expertise to help enterprise development. Nonetheless, inflation (39%), decreased client spending (33%), recruitment challenges (26%) and gathered tax debt (18%) had been cited as the important thing hurdles.
“There’s a sure resilience and willpower within the SME sector that’s the reason it’s such an necessary a part of the financial system and a key barometer of our financial outlook,” Callaghan stated.
What we’re seeing are SMEs frequently flexing and adapting their strategy to managing inflation by specializing in each inside and exterior value reductions, with out burdening prospects, and on a regular basis nonetheless striving for development,” added Callaghan.
Different Key Findings from Banjo Loans’ 2025 SME Compass Report:
Funding Plans for 2025: In 2025, 44% of SMEs are utilizing financing, with 61% counting on financial institution loans, 28% on investments from founders, and round one-in-four (24%) utilizing different lenders. Regardless of ongoing uncertainty relating to rates of interest, greater than half (52%) of SMEs stay cautiously optimistic for the yr forward.Recruitment Tendencies: Whereas recruitment has develop into considerably simpler for SMEs over the previous 12 months, attracting and retaining the suitable expertise stays a big problem. Forty-five % (45%) of companies discovered it simpler to rent in 2024 in comparison with earlier years.
Trying ahead, in 2025, 63% of SMEs report they plan to prioritise worker well-being as a key a part of their workforce technique. Moreover, 46% of companies plan to develop their workforce within the subsequent 12 months. SMEs in training and coaching (49%), monetary and insurance coverage providers (47%), and manufacturing (44%) stay notably involved about labor shortages.
Brokers and SME Financing: In response to SME Compass knowledge, 38% of SMEs used a dealer previously yr, valuing their help in securing higher rates of interest and simplifying the financing course of. The commonest methods SMEs discover brokers are by means of suggestions from accountants (46%), household or buddies (31%) or dealer comparability web sites (23%).Transport Postal and Warehousing: SMEs within the Transport Postal and Warehousing sector are particularly feeling the pinch, with 54% stating that inflation is a barrier to development, in comparison with the 39% common. Moreover, solely 69% of companies on this sector report that shoppers pay invoices on time, in comparison with an 85% common throughout all industries. These companies are additionally almost certainly to expertise challenges when acquiring finance (31%) and usually tend to base their financing selections on rates of interest (54%).
Go right here to learn the report in full.
