Inflation-hit SMEs eye business loans in 2023: Survey

The business-lending guide late last year commissioned a study of an independent panel of 210 Australian SMEs to discover which business costs inflation was impacting and whether SMEs will struggle to meet their expenses — maybe even needing financing to “get through tough times,” it explained.

Respondents were then asked to highlight which business costs, from a list of 10, they predict they will struggle to meet in 2023. These were: 1. labour; 2. supplier costs; 3. petrol; 4. equipment purchases; 5. rent; 6. insurance; 7. office and staff amenities; 8. utilities; 9. business consultants; and 10. taxes.

SBLA sought to discover whether inflated costs of doing business would prompt SMEs to take out a loan in the next year to keep up with their expenses and, if so, how much (from under $10,000 to over $2 million).

The survey of 210 owners and senior decision-makers across the full SME spectrum included: micro (1-10 employees), small (11-50 employees) and medium-sized (51-200 employees).

At the time of the survey, more than half (54 per cent) of Australian SMEs that participated revealed they would take out a loan, SBLA confirmed. More than a quarter (28 per cent) would take out a business loan of $50,000 or more and 25 per cent would take out a loan of less than $50,000, it highlighted.

Interestingly, a bigger proportion of small businesses (75 per cent) are likely to get a loan to meet expenses in 2023, followed by 66 per cent of medium-sized businesses and only 32 per cent of microbusinesses.

More than a third (37 per cent) of small businesses would consider borrowing more than $50,000, while 8 per cent of microbusinesses would borrow the same, the survey discovered.

In comparison, a similar proportion (39 per cent) of medium-sized businesses would borrow more than $100,000, it stated.

State-by-state insights

When comparing responses across the different states and territories, the survey found that a greater proportion of Victorian SMEs (61 per cent) would to take out a loan in 2023 to meet rising business costs.

This compared with 57 per cent of NSW businesses, 52 per cent of West Australian, 47 per cent of South Australian and 40 per cent of Queensland businesses.

Businesses in NSW and Victoria were most likely to take out larger loans, with an equal one third (33 per cent) willing to take out over $100,000 compared with an equal 20 per cent of Queensland and SA SMEs and 24 per cent of WA businesses, SMLA explained.

The business areas in question

In terms of which specific business areas were and of most concern to different businesses, three-quarters (72 per cent) of Australian SMEs revealed they would continue to struggle to meet some business costs in 2023.

The percentage of costs that will most impact businesses are petrol and business suppliers (chosen by an equal 31 per cent of respondents), followed by 26 per cent of respondents stating they would struggle to meet labour costs, 21 per cent will struggle with rent, 19 per cent with equipment purchases, an equal 17 per cent with insurance premiums and tax, 10 per cent with office and staff amenities, 8 per cent with business consultants (such as HR or accounting) and 1 per cent on other non-specified expenses. 28 per cent listed ‘none’ for areas of concern.

Areas affected by business size

Across all 10 cost categories, micro businesses predicted they will be better off in meeting expenses than small and medium sized businesses, the survey revealed.

Supplier costs are predicted to be the most difficult for small businesses to meet, with this expense topping the list for 46 per cent of small businesses. This was followed by petrol costs, chosen by 39 per cent of small businesses.

Among medium-sized businesses, petrol is the most challenging cost to meet – chosen by 40 per cent of respondents in this business category. Medium-sized businesses are also struggling with the cost of equipment purchases and insurance premiums (chosen by an equal 32 per cent of businesses in this category), the survey highlighted.

[Related: 80% of SMEs would dip into personal finances]