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SMEs list the top three expenses that they would find difficult to cover in 2023

This year’s high inflation levels’ impact on families has received much attention. However, new research reveals that 72 per cent of small businesses – that have survived the pandemic – have also been hit by rising expenses this year. 

The survey from Small Business Loans Australia finds that supplier expenses, gasoline, and labour came out on top of the costs that SMEs are battling with the most. SMEs estimate that these same expenditures will be a problem next year.

SMEs list the top three expenses that they would find difficult to cover in 2023

Respondents were asked which, out of the below ten costs, they are struggling to meet the most now and will struggle with next year: 

  • Labour 
  • Supplier costs 
  • Petrol 
  • Equipment purchases 
  • Rent 
  • Insurance premiums 
  • Office and staff amenities 
  • Utilities  
  • Business consultants 
  • Taxes 

Nearly one in three (31 per cent) SMEs are struggling with supplier and petrol costs, and 26 per cent cannot pay wages, salaries and contractors. Next, 21 per cent are finding it hard to pay rent, 19 per cent equipment; an equal 17 per cent cannot meet the costs of insurance and tax. Ten (10) per cent cannot meet the cost of office and staff amenities, and 8 per cent with business consultants such as HR or accounting. 

Small Business Loans Australia analysed responses across business sizes. Micro businesses predicted they would be better off in meeting expenses across all categories than small and medium-sized businesses: just 66 per cent of micro-businesses are struggling with costs and will continue to do so, compared with 15 per cent of small and medium-sized businesses. 

The costs impacting small and medium-sized businesses most are supplier costs (for 46 per cent of small and 34 per cent of medium-sized businesses) and petrol (for 39 per cent and 40 per cent, respectively).

Responses were also analysed across the major States. West Australian businesses indicated they are struggling to meet inflated supplier costs, labour costs and petrol prices above any other state. Following 38 per cent of West Australian SMEs who are most likely to struggle to pay labour costs, 27 per cent of South Australian businesses, 26 per cent of NSW businesses, 23 per cent of Victorian businesses, and 20 per cent of Queensland businesses will also struggle in this category.

Inflated rent is a significant issue among South Australian and NSW SMEs, with 27 per cent and 26 per cent, respectively, struggling to meet this cost. This is followed by just 16 per cent of Victorian and Queensland businesses and 14 per cent of West Australian businesses.

Small Business Loans Australia asked businesses if they would seek financing to cover any of the costs they are struggling with. Over half (54 per cent) said they would look to get a loan to help relieve the financial stress of inflation, with more than a quarter (28 per cent) prepared to take out more than $50,000.

Micro businesses proved their financial stability again, as the least likely group to require a loan, chosen by 32 per cent, compared with 66 per cent of medium-sized businesses and three-quarters (75 per cent) of small businesses.

More than a third (37 per cent) of small businesses would consider borrowing more than $50,000 to meet inflated costs, while 8 per cent of micro-businesses would borrow the same. 

Alon Rajic, Founder and Managing Director of Small Business Loans Australia, says: “SMEs have shown incredible resilience through the pandemic and are now facing unprecedented inflation. Like Australian households, businesses have been hit by significant increases in the everyday costs of running their operations. 

“SMEs are the backbone of the Australian economy, making up 98 per cent of the business market, but the tightening of budgets often has a greater impact on SMEs, which tend to have smaller financial cushioning than bigger corporations.

“If SMEs decide they need financing to get through the challenging period ahead, it is important for them to seek financial advice and research financing options to ensure they are in a position to service a loan over the next few years and secure the most cost-effective and lowest-risk loan. A loan comparison platform may be a good place to start.”

The full survey results, including breakdowns across business sizes and States, can be found here

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Yajush Gupta

Yajush Gupta

Yajush is a journalist at Dynamic Business. He previously worked with Reuters as a business correspondent and holds a postgrad degree in print journalism.

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