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Aussie SMEs are operating in a more challenging and unpredictable environment in 2025, with rising costs, fluctuating interest rates, and stricter bank lending policies all threatening the financial stability of the backbone of the Australian economy.
High business input costs and difficulties in hiring suitable staff continue to weigh heavily on operations. The Reserve Bank of Australia’s (RBA) April 2025 Financial Stability Review noted a rise in company insolvencies, with smaller businesses suffering the most from the tough economic conditions. These findings reflected the growing financial pressures on the sector.
Inflation is driving up the cost of goods, services, and wages, squeezing profit margins and making financial resilience harder to maintain, while borrowing has become more expensive, with traditional lenders introducing tighter requirements.
Nick McGrath, CEO of Moneytech, said: “SMEs are facing a perfect storm of financial challenges. Banks are tightening their belts, but the need for flexible, reliable financing with quick turnaround times has never been greater.”
While the federal budget 2025 delivered some assistance, concerns persist. Measures such as the $56.7 million Energy Efficiency Grants program will help some businesses upgrade appliances and improve energy efficiency.
However, the looming reduction of the instant asset write-off from $20,000 to $1,000 from 1 July 2025 is expected to restrict investment in new equipment and assets.
SMEs are encouraged to make the most of the current threshold before the change takes effect to maximise tax benefits and strengthen financial foundations.
The hospitality industry is among the hardest hit. Phil Di Bella, founder of Di Bella Coffee, described the reality: “It’s simple – costs are rising faster than revenue, and the squeeze is on from every angle.
“The fix isn’t just cutting costs, it’s improving efficiency, relevance, and telling a better story to attract and retain customers.”
With traditional lending proving more difficult, SMEs are increasingly seeking alternative finance solutions.
McGrath said: “We’re seeing a significant shift in how SMEs approach financing. Business owners are actively seeking partners who understand their industry and can provide tailored solutions that align with their unique needs.”
Di Bella further said that “the key is flexibility.”
“Tools like Moneytech give you control without the red tape. If the banks are closing doors, look for funding partners who understand your business model – not just your balance sheet,” Di Bella said.
Effective cash flow forecasting is also emerging as a vital part of business resilience. Di Bella likened it to driving at night: “If you can’t see where you’re going, you’ll crash. Break it down weekly, not monthly. Cash flow is daily. Keep it simple, real, and reviewed often.”
McGrath echoed this, saying: “Forecasting isn’t just a financial exercise, it’s about building resilience. It’s about anticipating challenges and having the flexibility to adapt quickly.”
Technology is also proving critical in helping SMEs navigate uncertainty. Di Bella emphasised its role in efficiency: “Technology removes friction. Whether it’s live dashboards, smart invoicing, or supply chain tracking, if it saves you time or reduces risk, it pays for itself.”
Financial stability in 2025 requires a combination of forward planning, smarter tools, and flexible finance.
As Di Bella said: “Cash flow is a symptom, focus on your process. Are you relevant? Are you solving a problem better than anyone else? Fix the process, and the cash will follow.”
As the economic landscape continues to shift, adaptability will be key for SMEs seeking long-term sustainability.
“For many, this means moving beyond traditional financing and finding the right blend of smart forecasting, streamlined processes, and flexible funding solutions that fit their business needs,” McGrath said.
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