The latest survey from the small business lender suggests many SMEs have been risking long-term pain by adopting short-term cost-cutting measures.
Many small and medium-sized enterprise (SME) owners have been forced to make tough decisions amid rising costs, according to new research from business lender ScotPac.
Inflation was the biggest concern for most business owners (82 per cent) in ScotPac’s SME Growth Index for September 2025, followed by rising electricity costs (49 per cent).
The biannual survey – conducted by East & Partners and based on insights from 724 SMEs with annual revenues of $1–$20 million – also revealed some of the short-term cost-cutting measures many businesses have been forced to adopt.
More than two-thirds (72 per cent) of SME owners said they had frozen new recruitment, while over half (62 per cent) reported delaying capital expenditure.
A further 58 per cent said they had reduced operating costs, and 7 per cent indicated they were working longer hours to manage rising expenses.
ScotPac CEO Jon Sutton said wage inflation and high energy costs had created a tipping point, with many SME owners now forced to make tough short-term decisions.
“Australian SMEs have shown incredible resilience in the face of rising costs in recent years, but many are now operating in survival mode as cost pressures intensify,” he said.
“Defensive strategies like freezing new hires or deferring capex are understandable when profit margins are being eroded, but they can undermine long-term growth.”
The findings follow a 3.5 per cent increase in the national minimum wage and award rates on 1 July.
ScotPac also pointed to rising electricity costs, which the non-bank lender said now account for around 8 per cent of the average SME cost base.
Sutton said one of the most powerful tools to combat rising costs without stalling growth is a stable, predictable cash flow.
“When cash flow is strong, businesses are better placed to absorb cost pressures, retain staff, and invest in their future, rather than just survive from quarter to quarter,” Sutton said.
“Brokers are playing a crucial role in helping SMEs navigate this environment.
“Their ability to find the right funding solution, tailored to a business’s needs, can mean the difference between standing still and moving forward.”
Sutton also noted that just 19 per cent of respondents said they had turned to a business finance solution to free up working capital.
“The best-performing SMEs are those that take proactive steps to stabilise their cash flow,” he added, noting that ScotPac recently launched a new line of credit product to help ease the cash flow burden.
Brokers can learn more about trends in cash flow finance in the upcoming Broker’s Guide to Commercial Finance, included with the November edition of The Adviser magazine for Premium Members.
For more information or to subscribe to a Premium Membership, click here.
[Related: Almost two-thirds of SMEs forecast revenue growth]
