After a tough few years, Australian SMEs are finally getting back on their feet, but they are worried that rising wages and other costs now threaten to derail their recovery.

These are among the key findings of the latest  ScotPac SME Growth Index, Australia’s longest-running in-depth research on the needs and sentiments of small and medium enterprises.

Round 16 of the twice-yearly survey polled over 700 SMEs from across the country and reveals that almost two thirds are confident they will achieve their revenue targets 2022, and one in two plan to invest over the next six months.

However three quarters of larger SMEs (revenue of $5m – $20 million) and two thirds of small SMEs (revenue of $1m – $5 million) are concerned about the impact of wage hikes on their business, and 40% say hiring challenges and staff shortages are holding them back.

These findings reflect the negative impacts of Australia’s current tight labour market on small businesses. With the unemployment rate at its lowest in decades there is little spare labour capacity left in the economy, and this will inevitably force employers to compete by offering higher pay.

And minimum wage workers are already receiving a de facto earnings boost with effect from July, with an increase in super contributions to 10.5% together with the elimination of the $450 minimum monthly earnings threshold on those payments.

However, wages are not the only source of growing cost pressures on the small business sector. The Growth Index survey found inflation is a concern for 44.8% of SMEs, as are increasing fuel bills (30.3%), energy prices (26.8%), regulatory and compliance costs (26.6%) and logistics fees (25.5%).

Yet despite 53.6% of SMEs falling short of revenue targets set 12 months earlier (April 2021) – with an average shortfall of 18.8% – 60.9% are confident they will achieve their 2022 revenue targets. 

ScotPac CEO Jon Sutton says: “SMEs are reporting a higher level of confidence in the economic outlook, with a majority saying they are confident in the outlook for their business.

“However, they are well aware of further challenges on the horizon, with rising wage costs and interest rates the major concerns and they will be looking to the Federal Government for support.”

The importance of the small business sector, which according to a recent report by Xero accounts for 99.8% of all businesses, 66% of employment and 55% of value added to the economy, cannot be overstated.

And when we asked SMEs what concrete steps they want the new federal government to take to support them, an extension of the accelerated depreciation scheme topped the list for 24.3%, followed by company tax cut relief (18.5%), and simplified Business Activity Statement (BAS) and general regulatory requirements (17.7%).

As their cost pressures mount, cash flow management will be key to small business’ survival and success. Yet when it comes to raising capital, they say they are frustrated with slow loan approvals. The average reported loan approval timeframe stretches out to over a month, or 35.2 days, with some SMEs even seeing delays of almost two months.

Today more than ever, SMEs need fast, flexible finance solutions to grow their pipelines, fill cash flow gaps and provide capital injections. 

So it’s no surprise that demand for non-bank funding is expanding rapidly, with the proportion of small businesses planning to borrow from non-bank lenders doubling since 2018 from 15% to 30% as SMEs increasingly explore the wide range of funding options available to them today.

Looking for funding to help with the rising costs of running a business? We can help small and large business, simple to complex needs across a range of industries. Speak to us today to explore options or fill in the form below.