Cash buffers remain thin, with half of SMEs saying they would run out within six months if revenue stopped
Australian small and medium-sized enterprises are making funding decisions under increasing cash flow pressure, according to SME specialist lender Banjo Loans, with many reporting they have postponed growth plans because reserves are limited.
The lender’s SME Compass Report has found that 28% of SMEs view cash flow as a constraint on expansion, while 45% have delayed pursuing opportunities over the past 12 months due to those concerns. It also finds that half of surveyed businesses would exhaust cash within six months if revenue stopped, and only 19% believe they could continue operating for more than a year without fresh income.
The findings come as interest rate settings remain a central risk for borrowers. The Reserve Bank of Australia delivered consecutive 25 basis point increases in February and March, taking the cash rate to 4.1%. The central bank has warned that inflation is expected to stay above its target for some time, raising the prospect that borrowing costs remain elevated.
Against this backdrop, the Banjo Loans report points to a rise in rate sensitivity. It says 59% of SMEs would change business settings if rates moved, up from 52% previously recorded. If mortgage rates or business lending costs increased, 48% said they would take action, including refinancing or deferring new borrowing. If rates fell, 55% said they would adjust, most commonly by accelerating debt repayments.
“The Compass Report highlights that SMEs are balancing growth ambitions with survival strategies,” said Guy Callaghan (pictured right), chief executive of Banjo Loans. “Inflation is the dominant pressure, while cash flow concerns are intensifying, forcing businesses to prioritise viability over expansion.”
The report also describes a “multi-speed” SME economy that could influence lenders’ approaches to risk in commercial credit and property-secured lending.
Retail businesses are identified as among the most exposed, with 83% citing inflation as a principal barrier to growth and long-term confidence in the sector falling to 55%. By contrast, firms in information media and telecommunications are reported to have steadier cash positions and stronger confidence.
Across the country, 83% of SMEs said at least one issue was a persistent concern, with inflation, cash flow and staffing among the most frequently cited pressures.
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