Regional small businesses showing ‘poor health’: Prospa

The latest SME Sentiment Report conducted by YouGov and commissioned by fintech lender Prospa has found worrying signs of financial stress and ‘poor health’ among regional small- to medium-sized enterprises (SMEs) in the lead-up to the holiday season.

Collecting responses from 500 SME owners across Australia, the research found that 86 per cent of SMEs are experiencing “mounting worries” as they approach the seasonal rush.

The top three concerns among SME owners were the rising cost of goods and services (58 per cent), rising cost of utilities (48 per cent), and lower-than-expected consumer spending (36 per cent).

In addition, 43 per cent of regional small businesses said they are not optimistic about the economic outlook for the next 12 months.

According to the research, Queensland revealed a “prime example of a clear divide” among metropolitan and regional businesses, with 74 per cent of metropolitan Brisbane-based businesses feeling “extremely or somewhat optimistic” about the economic outlook, while only 47 per cent of regional businesses felt the same.

Beau Bertoli, co-founder and chief revenue officer at Prospa, said that this data “underscores the disproportionate impact on businesses based outside of major metro areas”.

“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,” Mr Bertoli said.

“As a result, nearly nine in 10 regional small businesses have shared with us that they have concerns going into the holiday period.”

Furthermore, the research found that while 53 per cent of SMEs sourced business funding from traditional lenders, 48 per cent said the process was slow, emphasising the need for increased education around faster and more accessible alternate financing solutions.

This comes as equipment finance broker and director at Commercial Point Finance, Brendan Scotter, outlined concerns over clients being unable to access funding due to the current credit scoring systems.

“If you’ve got a client who’s growing aggressively and they need to buy a commercial property and they need to buy a lot of equipment and they need cash flow finance, etc … we’re having to reach out to different lenders in different spaces," he said.

"And each and every time the lender is hitting their credit file for an inquiry to make sure they’re creditworthy."

Adding to this, a recent survey conducted by online SME lender OnDeck found that 74 per cent of SMEs were facing hurdles when it came to raising capital, with 65 per cent saying that faster loan approvals would help improve cash flow.

Prospa’s Mr Bertoli added: “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.

“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.”

The report found that almost one-quarter of SMEs are seeking to access funds, averaging $24,903 over the next 12 months.

Nationally, this equates to 524,000 SMEs, with a collective borrowing power of $13 billion on average.

[RELATED: ¾ SMEs struggle to raise capital: OnDeck]