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Regional small businesses rate their overall health as ‘poor’ as inflationary pressures mount

  • Written by Business Daily Media

Christmas cheer is in short supply as almost nine in ten regional small businesses are worried about navigating the holiday period including due to rate rises, post office closures and fuel hikes 


New research from Australia’s leading online small business lender, Prospa, reveals that small businesses outside of Australia’s capital cities are slated to be hit financially, with a third rating their overall business health in the current landscape as poor.  


The new 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 report highlights growing concerns from the small business community on their business viability heading into the busy holiday period, and a yawning financial gap between metropolitan and regional businesses due to economic pressures.


“The data underscores the disproportionate impact on businesses based outside of major metro areas, particularly concerning stark increases to goods and services costs,” said Beau Bertoli, co-founder and Chief Revenue Officer at Prospa. “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 ten regional small businesses have shared with us that they have concerns going into the holiday period.”


Small businesses outside of major capital cities bearing the brunt

Following the news that Australia Post plans to cut up to a third of its postal outlets across the country over the next 12 months, combined with the added pressure of rapidly rising goods and services costs, small businesses based outside of capital cities are disproportionately feeling the pinch. In fact, among those businesses who have concerns going into the holiday period, regional businesses are more likely than capital city-based businesses to say they are worried about the rising cost of goods or services (73 per cent compared to 64 per cent).


Additionally, over two in five (43 per cent) regional businesses 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 per cent) of capital Brisbane-based businesses feel extremely or somewhat optimistic about the economic outlook for the next 12 months, under half (47 per cent) of regional businesses in Queensland feel the same.


Small businesses not so festive this holiday shopping season 

Nearly nine in ten (86 per cent) Australian small businesses are experiencing mounting worries as they gear up for the seasonal rush. The top three concerns cited by respondents are the rising cost of goods or services (58 per cent), rising cost of utilities (48 per cent) and lower than expected consumer spending (36 per cent).


Many small businesses are forecasting this month’s rate rise from the Reserve Bank Australia could further dampen consumer confidence and spending, particularly in the retail and hospitality sectors. In fact, those working within the hospitality and retail industries are three times more likely to say they feel not at all optimistic about the economic outlook for the next 12 months compared to those working within beauty and health (17 per cent compared to 6 per cent).


Lack of access to or slow funding is stunting business growth

As inflation figures continue to hang heavy over small businesses and as late payment times averaged over three weeks in September, the need for financial support is growing. While over half (53 per cent) of Australian small businesses have sourced business funding from a traditional bank in the past, around the same amount among these respondents (48 per cent) say the process was slow, highlighting the need for increased education around faster and more accessible alternative finance solutions.


Nearly a quarter of Australia’s small businesses 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 AUD $13.0 billion on average, all being channelled into the local economy. 


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


“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,” said Beau.  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.”

About Prospa 

Prospa Group Limited (ASX: PGL) is a leading fintech company with a commitment to unleash the potential of small business in Australia and New Zealand. We do this through an innovative approach to developing simple, stress free and seamless financial management products and services. Since 2012, we have provided more than $3.4 billion of funding to support the growth and operations of thousands of small businesses. We also work with more than 14,000 trusted brokers, accountants, and aggregator partners, to deliver flexible funding solutions to their clients. At Prospa, we're serious about our impact on our people, communities, and the planet. Our core company value of One Team is backed by our recognition as a Great Place To Work in Australia and a WORK180 Endorsed Employer for Women.


Report Methodology

The SME Sentiment Report study was conducted online between 10th – 18th October 2023. The sample consisted of a nationally representative sample of 502 Australian business owners and primary decision makers of businesses with fewer than 50 employees. For brevity, these respondents will be referred to as ‘small businesses’ throughout this release. YouGov designed the questionnaire in consultation with Prospa. Following the completion of interviewing, the data was weighted by business size and location, and the sample is representative of the Australian population aged 18+ who are business owners or primary decision makers of businesses with fewer than 50 employees (approximately 2.3 million Australian adults). All figures, unless otherwise stated, are from YouGov Plc.


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