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Tighter employee laws, increased competition and cyber attacks are among the seven challenges SMEs are set to face in 2025, according to Small Business Loans Australia.
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SMEs set to face 7 major challenges in 2025, research reveals
20 December 2024
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Research by Small Business Loans Australia has indicated that small businesses are set to continue encountering significant challenges next year, with business failure rates climbing to 2020 levels.
According to the results, tighter employee laws, lack of resources, inadequate government support, increased competition, late payments, cyber attacks and financial service fees would be the seven main challenges presented to SMEs in 2025.
Small Business Loans Australia founder Alon Rajic said SMEs were set to continue facing considerable challenges going into the new year.
“Small to medium-sized businesses make up 98 per cent of all businesses in Australia, and they are increasingly doing it tough,” he said.
“As we head into 2025, they will likely continue suffering resource shortages, reduced customer spending and continued inflation, all of which strain limited resources.”
“Other challenges like bank fees on international transfers and cyberattacks can be reduced through preparation, awareness and allocation of resources. It is important that SMBs prepare for these hurdles and know how to receive support from either private financial providers or the Government.”
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It was noted SMEs were set to continue being resource-poor, however, AI would help alleviate business pressures by leveraging talent search and appointment.
According to the study, 60 per cent of Australian small businesses were already using AI or planning to integrate it into their business within the next two years.
“SMBs are adopting AI tools such as AI-powered reporting and chatbots with automated email replies to streamline time-consuming tasks and improve operational efficiency,” Rajic said.
Small businesses would also continue to find it increasingly difficult to stay afloat in the current environment of rising wages, reduced customer spending, ongoing inflations and regulatory red tape, with 94 per cent of business owners having said they needed more government support to survive.
With a lack of sound government assistance, in 2023–24 the number of companies forced into external administration grew by 39 per cent from the previous year.
The Small Business Loans Australia research showed SMEs would also start to see more competition from a growing number of Australians starting side hustles.
“The survey found that 1 in 2 Australians are considering starting a small business in the next five years,” Rajic said.
“A further 38 per cent would run a side hustle in addition to their main job and the main motivator is to boost incomes as inflation and interest rates put pressure on household budgets.”
Despite mixed opinions towards cash flow, Rajic said SMEs would continue with tight cash reserves as nearly half of businesses were forced to reduce their income in 2024 and 31 per cent dipped into personal funds to cover business expenses.
The research found one in five businesses had zero cash reserves which were exacerbated by late payments, decreased consumer spending and lack of customer satisfaction regarding their own lack of cash flow.
Rajic said other notable challenges SMEs would face in 2025 included cyber attacks and extreme financial services fees.
“Forty-three per cent of cyberattacks target small businesses and the number of reported attacks has steadily increased since 2019,” he said.
“In terms of financial fees, small to medium businesses often lack the resources and time to shop around for better rates across financial products, leading to many overpaying when transacting.”
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