Small business optimism at peak level, says Prospa

Growth deemed a priority

Small business optimism at peak level, says Prospa

Heading out of the COVID-19 pandemic, optimism among small businesses is peaking as they look towards future growth.

Research conducted by YouGov for small business lender Prospa from 19 to 26 April, showed 81% of the nation’s small-to-medium sized businesses expect to grow in the next 12 months.

Referrals from existing clients, increasing business from existing clients and using marketing and advertising were cited as top sources of growth, followed by offering new products or services.

The majority expected to maintain or increase revenue, 42% forecasting revenue growth over the next 12 months at an average of 23%.

Based on the views of over 500 SMEs with fewer than 50 staff, findings showed 87% of business owners also anticipate challenges over the same period.

The top three concerns facing Australian business owners and decision makers were increased operating costs, increasing costs of transport, delivery and/or freight, and unpredictable or unstable revenue.

Just under a quarter (24%) were concerned about higher inflation, supply chain disruptions (23%) and competition (22%).

Read more: Prospa chalks up record quarterly lending growth

Prospa co-founder and chief revenue officer Beau Bertoli (pictured) summed up the COVID-19 pandemic as “not an easy ride” for Australia’s small business owners.

“Despite ongoing challenges, the majority of small business owners have been working hard to make smart decisions to drive new revenue and become more efficient to propel growth,” Bertoli said.

Findings showed seven out of 10 business owners had either made or were in the process of making changes to their business.

A large majority said they had already made changes to their pricing models to manage inflation, and that they planned to increase prices further in the next 12 months.

Almost three-quarters (71%) of business owners intending to borrow said they would borrow in the short term, to help manage uncertainty.

Cashflow management is among the top challenges experienced by small business owners, Bertoli said.

Access to working capital is the key to helping cover temporary shortfalls or investments for growth.

“Historically business owners have turned to traditional lenders, only to be faced with a strict lending criterion and an extensive application process. As a result, studies have found $23.9 billion of funding was declined last year across Australia,” Bertoli said.

Read more: Big banks at risk of losing SME customers - research

As findings indicated a large portion of SMEs see borrowing as a priority, Bertoli said this represented an opportunity for brokers and advisers to expand into commercial lending.

“Small businesses are not only confident but studies show business owners are planning to apply for funds sooner to spare them from paying extra on their repayments. As a result, we encourage our partners to start conversations with small business clients and support them with accessing capital fast to keep their business moving,” Bertoli said.

An RFI study conducted in December 2021 found a 56% increase in SMEs turning to brokers and advisers.

Due to challenges experienced with traditional lenders, in the post COVID-19 environment, Prospa is aware of more small businesses turning to brokers and advisers for advice on cash flow management, Bertoli said. 

“This is an opportunity to encourage brokers to educate small business clients about the range of alternative lenders available to provide access to capital fast, enabling businesses to take a hold of opportunities sooner to recover and grow over the year,” Bertoli said.

To meet increased demand, Prospa said it had launched a “no repayment for up to eight weeks” offer to support new and existing Australian small business customers as they prepare for the end of financial year.

The offer is available to new and existing approved customers on a new or refinanced Prospa Small Business Loan, or Prospa Plus Business Loan, settled until 30 June 2022 (inclusive), Prospa said.

The total loan repayment term would be extended by the time equal to the selected no repayment period (one to eight weeks).  Interest would accrue from the loan settlement date to the end of the term.