SMEs doing it tough: How brokers can help

As highlighted in research from Prospa, 18 per cent of small businesses are operating without any cash reserves and 77 per cent of leaders highlighted a personal impact due to rising costs. This is resulting in increased emotional stress for 43 per cent of leaders.

Reporting a subsequent personal impact due to rising costs – including on their personal finances – it is no surprise that almost half (43 per cent) are experiencing increased emotional stress.

“Australia’s small business owners have shown remarkable resilience through challenging times, but the financial toll is undeniable. The retail and hospitality sector in particular have experienced high volatility with supply chain disruptions, high inflation, and decreased consumer spending impacting their cashflow,” said Prospa chief revenue officer, Beau Bertoli.

Three-quarters (76 per cent) of business leaders anticipate challenges, with consumer spending the top concern for a third. Meanwhile, 28 per cent are worried about high operational costs, 27 per cent are concerned about maintaining product and/or service quality, 22 per cent are worried about managing high demand, and 19 per cent are worried about shifting consumer preferences.

Speaking to Broker Daily, Prospa’s general manager of sales and partnerships, Roberto Sanz, said that a drop in interest rates could be a sigh of relief for business leaders.

“Access to finance remains the biggest variable for SMEs. In the case of cash flow specifically, accessing capital has become increasingly critical in the current environment. What businesses do with that cash flow is likely dependent on the challenges they are facing in market – some of these being generated by high interest rates,” said Sanz.

“If rates began to drop, some pressures could lift in terms of operations, freeing up capital. Speculation is that things will improve in 2025, we have seen how resilient business owners are, and that they can navigate difficult environments and pivot to capitalise on opportunities. If interest rates started to improve. And at a time when SMEs often require solutions to their cash flow challenges fast, alternative lenders are uniquely positioned to meet the evolving needs of SMEs.”

Despite the optimism a cutting of interest rates could bring, the effect won’t be immediate, said Sanz.

“Assuming interest rates drop eventually this year, the impact directly on SMEs may not be felt immediately. However, a drop could give business owners the confidence to explore how accessing cash flow can help them realise opportunities,” he said.

With pressure mounting, many are seeking financial support. According to the data, 26 per cent of business leaders plan to seek external funds to support their business in the coming year. This is up from 23 per cent in 2023.

This is where brokers play a vital role in helping businesses keep on top of finances.

“Brokers have proven critical in supporting SMEs to navigate a challenging economic landscape in the past year. With lenders being agile to adjust their risk appetite, brokers were crucial to sourcing the right financial product for their small business clients. In the year ahead, if there is a potential improvement in business confidence, brokers will again play a key role in helping SMEs realise their opportunities,” said Sanz.

“Because brokers have the foundational skills needed to assess lending needs and navigate complex financial situations, expanding into small business lending has been a natural progression for many in the industry. Leveraging existing skills to address a critical market need.

“While residential lending is still the foundation of many brokerage businesses, there is so much opportunity to easily expand into the SME sector, largely thanks to the technology available. That is why we created Prospa IQ – a first of its kind tool to help brokers answer these questions in seconds, and provide quicker and more flexible loan options for SME owners. If brokers can take advantage of tools like this, they will not only able to unlock the SME business market, but also build trust with existing customers.”

[Related: SMEs suffering as consumer spending dips]

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

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