The number of struggling businesses is tipped to remain unchanged or rise in FY24
Nine in 10 brokers are expecting the number of struggling businesses to remain unchanged or increase in FY24, while more than a quarter believe that the Australian economy will enter a recession in the near future.
This was according to new research by commercial asset finance lender Metro, which surveyed 500 business brokers about their predictions for the upcoming financial year, and those of their customers.
Ninety-three per cent of brokers expect borrowers to purchase the same amount of assets, or less, in the next financial year, compared to FY23, the survey found.
“Our brokers specialise in developing close relationships with their customers, so they know how tough it is for smaller businesses at the moment,” Metro CEO Phillip Crossman (pictured above) said. “That said, the silver lining is a shared view that supply chain issues will continue to improve throughout the year.”
Nine in 10 brokers, meanwhile, believe that supply chain issues will not deteriorate this year, with nearly half of them (45%) anticipating a measurable improvement in the supply chain situation.
Despite the ongoing rate hikes and tightened cash flow, many small businesses are finding ways to adapt to the tougher economic environment.
In the three months to March, more than 11,000 new businesses were established, despite the producer price index increasing by more than 5% in the past 12 months to March.
Furthermore, the majority of loan applications are still being approved by the asset finance industry, with 65% of brokers reporting no increase in prime asset finance borrowers being turned away for the loan amount they are seeking.
Brokers are expecting their customers to continue to borrow, despite the economy’s fragility, the data showed.
“The prime SME sector in Australia is made up of resilient borrowers which are adaptable to market conditions,” Crossman said. “The assets they finance are income producing assets, not discretionary items, and therefore payment is prioritised to enable the borrower to continue their operations.”
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