Businesses expected to borrow less in 2024

Only 31 per cent plan to continue investing in their businesses next year.

These trends emerged from a survey involving 202 directors and decision-makers representing micro (one to four employees), small (five to 19 employees), and medium-sized businesses (20–199 employees), gauging the financial conservatism of Australian SMEs for the upcoming year regarding loan accessibility.

Specifically, the survey highlighted that 45 per cent of respondents will dedicate more time to sourcing and comparing the most favourable loan terms, while 23 per cent will deliberate longer before deciding to apply for a loan.

Additionally, 12 per cent have abandoned pursuing loans after initial inquiries and 10 per cent sought smaller loan amounts compared to previous years.

The data also revealed that medium-sized businesses, especially in Victoria, are more inclined to adopt a conservative fiscal stance in 2024.

A striking 97 per cent of medium-sized businesses aim to tighten their borrowing practices, contrasting with 82 per cent of small businesses.

Moreover, smaller businesses often face elevated borrowing costs as lenders perceive them as riskier.

Consequently, the current economic climate has intensified pressure on microbusinesses to secure optimal loan deals, with 54 per cent planning to do so next year, the data showed.

Founder and managing director of Small Business Loans Australia, Alon Rajic, noted the strain caused by the increased cost of living and higher interest rates, revealing that 64 per cent of small- to medium-sized businesses have been affected by delayed payments, leading to challenges in paying themselves or their staff.

“There is hope in sight, with the economy proving more resilient at the moment than first expected and that supports demand for Australian businesses,” Mr Rajic said.

He also acknowledged measures from the federal budget designed to aid businesses during challenging economic times, such as the instant asset write-off and small-business energy incentives.

The survey findings correlated with CreditorWatch’s November Business Risk Index, which showed a 26 per cent surge in external administrations from November 2022–23. Sectors like public administration, healthcare, and construction have experienced substantial spikes in external administrations due to various issues like project delays, cost overruns, labour shortages, and supply chain disruptions.

The survey findings correlated with CreditorWatch’s November Business Risk Index, which showed a 26 per cent surge in external administrations from November 2022–23.

Sectors like public administration, healthcare, and construction have experienced substantial spikes in external administrations due to various issues like project delays, cost overruns, labour shortages, and supply chain disruptions.

Across the states

In terms of regional differences, Victorian businesses stood out as the most cautious, with 96 per cent prioritising fiscal prudence in borrowing for 2024.

In comparison, 87 per cent in Queensland and 85 per cent in NSW expressed similar intentions.

Notably, 17 per cent of Victorian SMEs plan to seek smaller loans due to the economic climate.

Regarding the quest for optimal loan deals, 54 per cent of Queenslanders are poised to invest time in finding good deals, compared to 44 per cent in Victoria, 36 per cent in NSW, and 31 per cent in South Australia.

[Related: Concerns arise regarding business risks]