How trade finance is changing in 2022

By Richard Holdcroft – journalist

More than half of Australia’s small and medium enterprises (SMEs) are feeling positive about their prospects for revenue growth. However their forecasts vary widely, with one in four expecting their revenue to decline over the six months to September, pointing to an uneven economy and ongoing uncertainty in some regions and sectors.

This broad spread of sentiments was revealed by the latest round of the SME Growth Index. The bi-annual survey, Australia’s longest-running research report on small business sentiment, is conducted on behalf of ScotPac, Australia’s leading non-bank business lender.

The generally upbeat but very mixed feedback highlights the patchy nature of economic activity across the nation at the moment, says ScotPac CEO Jon Sutton.

“The wide range of revenue growth projections highlights the uneven impacts the Covid pandemic has had, especially in areas like employment challenges, supply chain disruptions and consumer confidence,” Mr Sutton says.

“But the fact that most small and medium businesses we spoke to are projecting a growth in revenue, coupled with the large number of start-ups in the past 12 months, reflects the resilience and adaptability of Australia’s SME sector.’’

This resilience is currently being tested on several fronts. Australia’s winter Omicron resurgence has been an unwelcome hurdle for businesses still getting back on their feet after the Covid lockdowns and other disruption of the past few years. SMEs, particularly those in retail and hospitality, are hoping governments will not be forced to reintroduce restrictive measures that may crimp spending. However the good news is that the current Covid wave is expected to peak and begin subsiding soon.

Beleaguered businesses are currently also facing ongoing staff shortages, with the latest Australian Bureau of Statistics figures showing almost a third of employing businesses (31%) are having difficulty finding employees. The ABS data reveals this is particularly disrupting the business operations of SMEs. An especially hard-hit sector is accommodation and food services, where over half of all employers are having trouble finding suitable staff to fill jobs.

Yet Australia’s record low unemployment also has a silver lining for businesses, as it means shoppers have more in their pockets to spend. And indeed retail sales rose 0.9% in May, the fifth straight month of growth and double market forecasts of a 0.4% increase, suggesting consumer demand is remaining strong even in the face of rising inflation and interest rates.

And in other good news for small businesses, the Commonwealth’s Procurement Rules have been updated with effect from July, doubling the proportion of the federal government’s massive $70 billion annual on contracts that must be directed to small businesses from 10% to 20%. This means an additional $583 million income per month for businesses with less than 200 employees.

The adaptability and resilience of SMEs as they feel their way through this period of uncertainty and uneven recovery is highlighted by some other findings of the ScotPac SME Growth Index. For example, it reveals that borrowing from alternative sources such as non-bank lenders by SMEs is growing rapidly as they explore the full range of funding options available to them today. Indeed, the proportion of planning to do so has doubled since H2 2018 from 15.4% to 30.6%.

ScotPac’s Mr Sutton said the SME sector overall remains upbeat, with the Growth Index indicating that more than half of all small and medium enterprises plan to invest in their business in the next six months, and almost two-thirds are confident they will achieve their 2022 business revenue targets. However they are hoping for more assistance from the Federal Government to address the challenges ahead.

‘‘More than 700 small and medium business leaders participated in the SME Growth Index and they were clear in the type of support they want from the Federal Government,’’ Mr Sutton says.

‘This includes further extension of the accelerated depreciation scheme, deeper company tax cut relief and simplified Business Activity Statement (BAS) and regulatory requirements.’’

Feel free to contact us for anything that relates to your business finances so we can help with your success.

4 Pickett Drive , Altona North, VIC 3025