We have just received the latest findings from our Small and Medium Business surveys, which shows that many are still running hard to stand still and are unwilling or unable to borrow more. The sector is an important bell-weather for the broader economy, because nearly half of all Australian households are reliant in part or in full on income from the sector, as either an owner of a small business, or employed by one.
We asked them about their likelihood to borrow (slightly more than half need to fund their businesses from loans) and 28% were less likely to borrow than a year ago.
Barriers to funding included the inability to find a lender, lack of security for a loan, the expense of borrowing, or simply maxed out already based on cash flow.
The main requirement was for working capital, rather than funding for business growth. Finance for vehicles was down a little compared with last year.
The demand for working capital was driven by many reasons, but the length of time to get paid was most significant, followed by borrowing to pay GST or tax.
The average debtor days remains significantly higher than pre-GFC, and clearly extended days chimes with the need for more working capital.
Finally, there is a small rise in bank switching, but still many SME’s do not. More than 60% have never switched banks.
We will publish some more detailed analysis in later posts. Meantime, you can read about our SME research programme, and last report here.
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