One in three SMEs plan to seek funding as cash reserves deplete
Small businesses across Australia are facing growing financial pressure as the end of the financial year approaches, a new report commissioned by Prospa has revealed.
The SME Sentiment Report found that 77% of small and medium-sized enterprises (SMEs) said they were personally affected by economic uncertainty and inflationary pressure. Nearly half reported cutting their own pay or experiencing higher levels of stress and burnout.
Thirteen per cent of SMEs surveyed reported having no cash reserves, while almost one-third (30%) said they expect to seek external financing within the coming year. On average, businesses are looking to borrow around $24,701 to cover shortfalls.
Two-thirds (66%) said they had faced cash flow stress in the past 12 months. Of those, nearly four in 10 indicated it had affected their sleep. Despite this, most small business owners are still confident about their business prospects, with 74% rating their current health as good. However, one in four rated their business performance as poor.
Cost pressures remain a key concern. Most businesses are responding by either cutting non-essential expenses (46%) or raising prices (37%).
“Small businesses are showing incredible resilience and adaptability,” said Beau Bertoli (pictured above), co-founder and chief revenue officer at Prospa. “It’s been a tough time for many, marked by sleepless nights and dipping into personal savings – but I’m continually impressed by how business owners are embracing technology and finding smarter ways to operate.”
Digital tools, particularly artificial intelligence, are playing a growing role in business strategy. Sixty percent of SME respondents said AI is important to their operations, especially for reducing admin workload (33%) and supporting growth plans (23%). Firms in professional services were leading this trend, with 82% identifying AI as a critical part of their toolkit.
However, only a minority of business owners planning investments to offset rising costs are targeting tech upgrades — just 21% of those surveyed are prioritising technology.
“Technology is no longer a luxury – it’s a necessity,” Bertoli said. “AI is helping small businesses do more with less, freeing up time and resources to focus on growth. But adoption, particularly if you are competing with larger or global businesses, needs to be higher.”
The report also shed light on the experiences of regional SMEs. More than half (56%) believed they would perform better if based in metropolitan areas, and 71% said clients or stakeholders in major cities often hold negative assumptions about regional firms’ professionalism and credibility.
At the same time, 52% of metro-based SMEs said they would consider relocating to a regional area if it meant improved revenue, indicating a shift in attitudes toward regional business opportunities.
“Regional businesses are just as ambitious and talented as their metro counterparts,” Bertoli said. “It’s time we challenge outdated perceptions and unlock the full potential of Australia’s regional economy.”
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