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Australian SMEs are dissatisfied with their current working capital and large businesses are struggling to access credit, according to the CreditorWatch Business Sentiment Survey.
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Australian businesses face cash flow and credit challenges, survey reveals
22 August 2024
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12 minute read
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CreditorWatch has released their Business Sentiment Survey that highlighted Australian small businesses are significantly disappointed with their current levels of working capital.
The survey results demonstrated a “stark contrast” between large and small businesses regarding their cash flow satisfaction.
It was found that 88 per cent of large businesses are ‘very satisfied’ or ‘somewhat satisfied’ with their current level of working capital, compared to only 61 per cent of small businesses.
The research demonstrated larger businesses are finding it increasingly harder to access credit, despite working capital satisfaction being high.
According to the results, 74 per cent of large businesses have ‘regularly’ or ‘occasionally’ experienced challenges when attempting to access credit, compared to 67 per cent of medium businesses and 43 per cent of small businesses.
Only 11 per cent of sole traders said they ‘regularly’ struggle to access credit compared to 44 per cent of large businesses.
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It was also highlighted in the survey that 62 per cent of businesses that have been in operation for a longer period of time find it harder to access finance than 50 per cent of businesses that have been in operation for a shorter period.
CreditorWatch CEO Patrick Coghlan said the survey results highlight the unexpected challenges faced by large, medium, and small businesses.
“It is assumed that smaller businesses are the ones struggling to get access to credit,” he said.
“However, the results reveal that it is larger businesses that are finding it difficult.
“This could be because they typically seek credit from banks, which have tighter lending standards than tier-two lenders.”
On an industry level, the distribution sector is the most dissatisfied with their current levels of working capital.
Thirty-eight per cent of distribution businesses said they were ‘dissatisfied’ or ‘very dissatisfied’ with their working capital.
This was compared to 24 per cent in the financial insurance sector, 25 per cent in business services, and 28 per cent in retail and hospitality.
In response to the credit and cash flow challenges of large and small businesses, results from the survey reflected businesses want to implement new strategies to initiate change.
Based on the results, “39 per cent of businesses plan to increase prices and 30 per cent aim to reduce non-essential expenses over the next 12 months to protect themselves through trade headwinds.”
Thirty-seven per cent of large businesses said they would invest in technology to enhance efficiency gains such as automation, compared to 22 per cent of medium businesses and 12 per cent of small businesses.
Businesses of varying sizes have also said they will switch to lower-cost suppliers to help navigate economic challenges.
The survey also showed an evident impact on staff, with large and small businesses having chosen to ‘lay off’ staff to help deal with the cash flow and credit challenges.
Coghlan said the results have clearly shown the credit issues faced by large businesses and the cash flow challenges of small businesses and what they are doing to overcome them.
“Both groups are implementing strategies like increasing prices and reducing non-essential expenses to manage these, but larger businesses are more focused on investing in technology to drive efficiency gains,” he said.
“These findings underscore the diverse financial pressures across the business landscape and the importance of tailored strategies to navigate these challenges.”
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