As the peak sales season nears, new research from YouGov, commissioned by Australia’s leading online small business lender, Prospa, highlights the high financial and emotional pressure facing Australia’s small business sector. With nearly one in five (18 per cent) small businesses operating without any cash reserves at all, and over three quarters (77 per cent) of leaders reporting a subsequent personal impact due to rising costs – including on their personal finances – it is no surprise that almost half (43 per cent) are experiencing increased emotional stress.

Provided the RBA continues to hold the cash rate in November in-line with current predictions, small businesses will feel a welcome relief as they approach the upcoming peak season.

“Australia’s small business owners have shown remarkable resilience through challenging times, but the financial toll is undeniable. The retail and hospitality sector in particular have experienced high volatility with supply chain disruptions, high inflation, and decreased consumer spending impacting their cashflow.” said Prospa Chief Revenue Officer, Beau Bertoli.

Reduced consumer spending top of mind this peak sales season

As the peak retail season approaches, three in four (76 per cent) business leaders anticipate facing at least one challenge. The most prominent concern is reduced consumer spending (33 per cent), followed by high operational costs (28 per cent), maintaining product and/or service quality (27 per cent), managing high demand (22 per cent) and shifting consumer preferences (19 per cent).

In response, there has been an upward trend in intent to access financial support, with 26 per cent of business leaders planning to seek external funds to support their business over the next year, compared to 23 per cent in 2023.

“While SMEs face significant economic hurdles in today’s climate, this peak sales season provides an opportunity to finish the year strong. Business owners can focus on marketing efforts to capture customer interest, shop around for competitive supplier rates, and consider external funding to give them an edge. By leaning into the resources available to them, small businesses can set themselves up for success ahead of the new year and focus on what they do best – running their business” added Beau.

Aussie business leaders take personal hit to keep doors open

With economic pressures mounting, small business leaders are sacrificing their personal finances to stay afloat. Nearly half (46 per cent) of leaders have reduced their own income, and 28 per cent have used personal funds to cover business expenses. This has unsurprisingly resulted in high-stress levels, as over two in five (43 per cent) report increased stress or burnout.

Those working in retail and hospitality were the most likely (89 per cent) to say they are being personally impacted by the rising costs. With these sectors having been disproportionately affected by a tightening economy and a decline in consumer spending, this indicates strong correlation between sector and personal impact.

Signs of stronger cash reserves on the horizon

While nearly a fifth of small businesses currently have no cash reserves to lean on, the number is down four per cent in the last 6 months. This indicates the tide is beginning to turn for small businesses, and with an impending rate cut on the cards for early next year, the light at the end of the tunnel is starting to shine brighter.

“It’s encouraging to see small businesses building up their cash reserves despite having to battle the harshest economic conditions since the GFC. This progress shows resilience, determination, and most importantly – hope. With the right support and resources, Australia’s SME community has what it takes to not only weather the upcoming sales storms head-on, but also make the shopping frenzy count, setting themselves up for financial success in 2025 and beyond” concluded Beau.