By Zilla Efrat 

There is a growing divide in how small and medium-sized enterprises across Australia view their near-term futures as they transition from COVID-19 lockdowns to a world of rapidly growing wages and stubbornly high inflation. 

The good news is that ScotPac’s SME Growth Index for October 2023 found that 57% of small and medium-sized businesses forecast growth in the coming months to the end of March 2024 – the highest figure in seven years. Their projections, however, vary wildly by geography and sector. 

The bad news is that a record 32% of small and medium-sized businesses are predicting their revenues will fall. Worryingly, that’s 18% more than a year ago. Businesses with more exposure to rising business expenses and cost of living pressures are feeling the pinch most. In addition, the downturn in the construction sector, which is the largest business category in the country, is no doubt a significant influence for these pessimistic forecasts. 

The growing divide

According to the research, the spread between positive and negative business revenue projections stretched from +13% to -22% – the widest range since the SME Growth Index began almost a decade ago. 

Small and medium-sized businesses in two states with large exposure to Australia’s booming resources sector – Western Australia and Queensland – are the most optimistic, forecasting revenue growth of 92% and 84% respectively. 

On the other hand, businesses in Victoria, which is yet to experience a post-COVID bounce back, are Australia’s most pessimistic, with only 17% expecting revenue growth. All other states had growth projections of over 50%. 

The report says the future picture is rosy for small and medium-sized businesses in regional Australia. Their growth projections are on the same levels as metropolitan-based businesses while their forecasts of revenue declines are at less than half of city levels. This is particularly pleasing given the concerns about the impact of a population drift back to our major cities. 

Financial health checks are on the rise

The SME Growth Index reveals that rapidly rising interest rates and higher core business costs have prompted businesses to boost the rate at which they review their primary lending relationships.  

In 2015, almost half (47%) of Australia’s small and medium-sized businesses had not reviewed their lending relationship for several years. Eight years on, that figure has now dropped to just 22%. 

“Regular lending health checks are becoming more entrenched as cashflow management and business planning tools,” explains ScotPac CEO Jon Sutton. 

“As businesses evolve and grow, their financial needs change. SMEs are increasingly looking to brokers to help them ensure their lending arrangements are aligned with current and future financial goals and are enabling the best use of capital.” 

Contact us for tailored funding solutions or a financial health check for your business.