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The latest data from Banjo has revealed a sharp increase in denied applications and deteriorating sector performance.
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Loan rejections surge for struggling SMEs
16 October 2024
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The outlook for small businesses continued to decline last quarter, with data showing a spike in loan rejections and arrears as high interest rates and inflation take their toll.
Business lender Banjo’s SME Barometer Report revealed a 35 per cent surge in rejected loan applications in the three months to October while MYOB data also showed declines in SME performance over the same period.
Banjo said businesses were sandbagging their operations at the start of the new financial year and “survival remains the order of the day”.
“Winter may have broken but businesses remain waiting for trading conditions to thaw,” the report said.
“Consumers are penny-pinching as cost-of-living pressures prove sticky, and as the RBA dampens expectations for that long-awaited rate cut.”
Despite small businesses taking up the option of extended payment terms, with applications for 60-month terms jumping 45 per cent on last quarter, Banjo said an inability to service new loans was still the leading cause of declined applications.
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Businesses were also failing to meet minimum eligibility criteria, it said. Compared to the same period last year, declined applications were up 118 per cent.
The outlook was especially grim for SMEs in manufacturing and wholesalers, with loan arrears worsening by 26 per cent and 38 per cent over the quarter respectively.
MYOB chief executive Paul Robson said current economic conditions were “disproportionately” impacting the small business sector, showing the need for targeted government support.
“Small businesses are feeling cost-of-living pressures just as consumers are across the board. Any assistance the government can provide to help relieve these pressures, as well as to lift their productivity, will be crucial to the economic health of the nation,” he said.
“The SME community was resilient in the face of the pandemic, and now the concern is that the side effects of inflationary pressures will linger within the community. As the majority employer of Australians, it is vital we provide the right level of support to SMEs to ensure their longevity and growth.”
It comes as the accounting software provider’s Business Monitor gave small businesses a performance score of -2.3 for August, down from -2.0 since the last data capture in May.
It said the latest findings revealed inflation, interest rates and a pullback in discretionary spending “further softened outputs for SMEs”.
“The small business sector continued to weaken in the last quarter both in absolute terms and relative to the rest of the economy,” according to research firm Impact Economics and Policy, which conducted the survey for MYOB.
“The impact of high interest rates and high inflation are being felt outside sectors directly impacted by the slowdown in consumer spending,” lead economist Angela Jackson said.
“We are likely to see another weak quarter of economic growth when the ABS releases its next quarterly National Accounts data in December.”
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