One in five Australian small businesses have exhausted their cash reserves, and nearly one in three owners are paying business expenses with their personal funds, according to fresh research from local lender Prospa.
An April survey of 506 business owners and decision-makers across Australia, conducted in partnership with YouGov, found the line between personal and professional finances is blurred through a tough economic climate.
About 22% of survey respondents said their small business has zero cash reserves, with 21% predicting they will run out within two months.
Operators are plugging the gap with their personal funds: some 31% of respondents reported siphoning their own cash into the business, and 46% said they have reduced their own income to get by.
The survey findings, released Monday, coincide with what might be the most difficult trading environment since the lifting of widespread COVID-19 restrictions.
Persistent inflation and high interest rates are putting pressure on household budgets, making it difficult for shoppers to spend up at their favourite local businesses.
Although household spending on health jumped almost 16% in the year to April, discretionary spending — including the sectors where many small businesses operate — lifted a comparably paltry 0.6%, according to the Australian Bureau of Statistics.
“We’re seeing a particular strain on the retail and hospitality industries, which have been disproportionately impacted by a decrease in discretionary spending, supply chain cost increases and rising fuel and energy expenses,” said Beau Bertoli, Prospa co-founder and chief revenue officer.
All eyes are now on the Reserve Bank of Australia and its next interest rate decision, set for Tuesday, with another hike likely to put even more pressure on consumers.
The Prospa research shows how those struggles are being felt emotionally, as well as financially.
About 44% of respondents reported increasing stress or burnout, with nearly one in three declaring they have spent less time with friends and family as they pour effort into their business.
The mental toll of running a small business is well-known, with the federal government stepping up to fund support services designed for entrepreneurs.
The May federal budget included another $10.8 million over two years to extend the Small Business Debt Helpline and the NewAccess for Small Business Owners program.
The Small Business Debt Helpline, accessible online or on 1800 413 828, provides free and confidential advice to entrepreneurs struggling with bills, repayments, and other financial constraints.
NewAccess for Small Business Owners, a collaboration between Beyond Blue and the Australian Small Business and Family Enterprise Ombudsman, offers small business operators up to six free mental health coaching sessions.
Its program is tailored to SME operators and sole traders, who can enquire about the service online.
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Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
