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Australian SMEs will pull back on borrowing and investing in 2024

As economic growth continues to lag, a survey indicates the majority of Australian business owners will be more conservative about borrowing and investing in their businesses next year. 

A startling 90 per cent of businesses will be more cautious about borrowing money, while 69 per cent will hold off on investments such as purchasing equipment or growing their team, due to the economic environment. Only 31 per cent will continue to invest in business going into next year.

The trends were revealed in an independent survey commissioned by business loan comparison site Small Business Loans Australia. The survey questioned 202 directors and decision-makers across micro (1-4 employees), small (5-19 employees) and medium-sized businesses (20-199 employees) about whether Australian SMEs will be more conservative with their finances in 2024 if they were in the market for a loan. 

The full survey results, including breakdowns across the major states, can be found here:

Specifically, 45 per cent of survey respondents will spend more time sourcing and comparing the best value loan, while 23 per cent will spend more time considering whether to apply for a loan at all. A further 12 per cent reveal they have ditched loans after initial enquiries and 10 per cent will seek smaller loans than in previous years. 

SME and Victorian businesses more likely to be conservative with their finances

Medium-sized businesses are more likely to tighten their budgets in 2024, with 97 per cent aiming to be more conservative with their borrowing next year. This compares with 82 per cent of small businesses.

Smaller businesses usually face higher borrowing costs due to lenders regarding them as ‘riskier’ than larger businesses. These higher costs in the current economic climate have put even more pressure on micro businesses to source and secure the best deal for them, with the survey revealing 54 per cent of micro businesses aiming to do so next year.

Victorian businesses are more likely (at 96%) to be cautious with their borrowing in 2024 than businesses in other states. This compares with 87 per cent in Queensland and 85 per cent in NSW who said the same. The data also found that 17 per cent of Victorian SMEs will seek smaller loans compared to last year due to the economic climate.

When it comes to sourcing and comparing the best value loans, Queenslanders are most likely (at 54%) to spend the time finding a good deal. This compares with 44 per cent in Victoria, 36 per cent in New South Wales and 31 per cent in South Australia.

SME and those in Qld and SA least likely to invest in their businesses

The research also revealed that medium-sized businesses are highly likely to refrain from investing in their business, at 77 per cent – 9 per cent higher than the rate of all respondents. 

Businesses in Queensland and South Australia will be the most conservative (at an equal 77%) when it comes to putting money back into their businesses. This compares with 62 per cent of Victorian businesses.

Alon Rajic, Founder and Managing Director of Small Business Loans Australia, says: “Economic growth in Australia is still below historical trends in the last quarter, so it makes sense that businesses are playing it safe. The cost-of-living and higher interest rates are putting pressure on everyone. Our research has shown that many small to medium businesses – 64 per cent – have been impacted by late payments, with almost a quarter of business owners struggling to pay themselves and 15 per cent struggling to pay staff[3]. There are a lot of financial pressures in play right now, so many business owners will be waiting to see how the next year pans out before taking on any financial risk.

“There is hope in sight, with the economy proving more resilient at the moment than first expected, and that supports demand for Australian businesses. The Federal Budget also put measures in place to support businesses through these tough economic times. The instant asset write-off allowing SMEs to immediately deduct assets is one such measure, and small business energy incentives build on that relief too.”

The full survey results, including breakdowns across the major states, can be found here:   

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