Aussie companies to reduce borrowing and investing in 2024

Businesses are feeling the economic pressure, and many are responding to this hard time by pulling back on spending, including borrowing and investing.

Data from Small Business Loans Australia found that businesses of all sizes across the country are reducing their spending. In fact, 90 per cent of Australian businesses said they would be more conservative in their borrowing. Meanwhile, 97 per cent of medium-sized businesses said the same, and 69 per cent of SMEs will hold off on investing in their business.

“Economic growth in Australia is still below historical trends in the last quarter, so it makes sense that businesses are playing it safe. The cost of living and higher interest rates are putting pressure on everyone,” commented Alon Rajic, founder and managing director of Small Business Loans Australia.

“Our research has shown that many small to medium businesses – 64 per cent – have been impacted by late payments, with almost a quarter of business owners struggling to pay themselves and 15 per cent struggling to pay staff. There are a lot of financial pressures in play right now, so many business owners will be waiting to see how the next year pans out before taking on any financial risk.”

Medium-sized businesses were the most likely to enter 2024 more conservatively, with 97 per cent claiming that is the approach that will be taken. This was compared to 82 per cent of small businesses.

Based on the research, Victoria was the area with the most conservative businesses, with 96 per cent claiming to be cautious with their borrowing in 2024. Queensland and NSW followed at 87 per cent and 85 per cent, respectively. Meanwhile, 17 per cent of Victorian SMEs will look for smaller loans compared to last year due to the economic climate.

“There is hope in sight, with the economy proving more resilient at the moment than first expected, and that supports demand for Australian businesses. The federal budget also put measures in place to support businesses through these tough economic times. The instant asset write-off allowing SMEs to immediately deduct assets is one such measure, and small business energy incentives build on that relief, too,” Mr Rajic said.

Just 31 per cent of respondents said they would continue to invest in the coming year. The number of loans will likely take a hit from this reduction in investment, with 23 per cent of businesses claiming they will spend more time considering if getting a loan is a viable option. Others are choosing to be more proactive, with 45 per cent stating they will be spending more time sourcing and comparing loans. Meanwhile, 12 per cent said they have ditched loans, and 10 per cent will seek smaller loans than in previous years.