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CEO of small business lender Grow Capital, Gus Gilkeson, has cautioned Australian businesses to “expect a level of scrutiny” from lenders as the global shock waves of US President Donald Trump’s sweeping tariffs take effect.
Gilkeson said that along with an “obvious impact” on businesses that import into the US, the “ripple effect means all businesses need to do their due diligence”.
“This is not just a US issue, this is a global issue that will have impacts on supply chains, supplier markets and ultimately, business profitability,” he said.
“Lenders will be asking extra questions not only around your direct impacts, but also the indirect impacts via your suppliers, buyers and other inputs into your business.”
This warning comes as a report published on Fifth Quadrant in April (shortly after the tariffs took effect) highlighted that confidence in both global and domestic economics had plummeted as the US began its trade wars with foreign nations. According to the report, 66 per cent of SMEs expected a weaker global economy (up from 43 per cent in February) and 56 per cent anticipated a weaker domestic outlook, up from 39 per cent.
Additionally, 68 per cent of SMEs believed that the Trump administration would have a negative impact on Australia’s economy, with heightened concern around geopolitical tensions and associated supply chain challenges.
It also found that demand for additional financing fell to its lowest point in a year, down to 8 per cent, most notably among smaller SMEs. However, loan stress had eased, down from 12 per cent in December to 8 per cent, largely supported by rate cuts. The report said that this could “be short lived in the current environment”.
Gilkeson said businesses looking for financing must ensure they’re asking the right questions and have “concrete evidence to support their answers”.
“Even if your key market is domestic, lenders will want to know the flow on impacts from any overseas suppliers you might have, how supply chain disruptions and currency fluctuations might impact your business model, cash flow and profitability forecasts,” he said.
“It’s not enough to say you won’t be impacted, as chances are you will, even if only indirectly.”
When navigating changing trade environments, it’s crucial for businesses to assess the potential impact on three key fundamentals: time, team, and money, according to Gilkeson.
Firstly, time plays a critical role. If businesses or suppliers need to pivot to new markets to avoid tariffs, this can significantly affect delivery schedules and lead times.
Extended supply times can disrupt the ability to meet client expectations, while also straining cash flow and increasing operational costs.
The team element involves understanding who your business currently relies on – including suppliers, employees, and stakeholders – and where they are located.
Geographical shifts in supply chains or workforce can lead to complex logistical and communication challenges.
Lastly, money remains a central concern. Whether absorbing tariffs, switching suppliers, or exploring new markets, these changes often come with added expenses.
Additionally, broader supply chain disruptions can inflate costs further, affecting your budget, cash flow, and long-term financial planning. Careful evaluation of these three areas can help businesses prepare and adapt more effectively in a shifting economic landscape.
Gilkeson further said that when equity markets are impacted, securing finance in private markets can be more challenging.
“There is traditionally less funding to go around during periods of economic uncertainty, as investors opt to hold onto cash reserves,” Gilkeson said.
“Businesses looking a little uncertain or on the fringe might be more easily overlooked in favour of those who have done their due diligence and can prove they’re well-prepared to ride out the months ahead.”
Despite these headwinds, Gilkeson said there are also “potential opportunities to be had”.
“With some countries now looking to move away from the US, there is the potential for Australian businesses to expand into other markets or perhaps negotiate improved deals with suppliers,” Gilkeson said.
“Currency fluctuations may also work in favour of Australian businesses, depending on your hedging strategy.
“Above all else, if you aren’t sure, it’s worth seeking professional advice from your banker, broker, or other trusted financial adviser. Well-informed is well-prepared, now is not the time to be simply hoping for the best.”
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