Prospa research shows small business resilience
New findings from Prospa highlight how New Zealand's small and medium-sized enterprises (SMEs) are adjusting their financial approaches to navigate growing economic challenges.
The most recent RFI Global research, commissioned by Prospa, indicates a rising concern among SMEs about economic and regulatory issues, now affecting 35% of businesses, up from 23% in the previous year.
Concerns related to business demand and cash flow have also increased sharply, now at 27%, compared to 15% in May 2023, according to the research undertaken between May and June 2024.
Among the key financial pressures, 68% of SMEs report higher supply chain costs, 62% are grappling with increased labour expenses, and 55% anticipate a drop in turnover over the next year.
Staffing, recruitment, and payroll are identified as the largest expenses by 38% of SMEs, while 36% point to government payments and taxes as significant financial challenges.
Response to financial strain
A staggering 51% of SMEs are concerned about accessing the funds they need. In response to the economic instability, SMEs are adjusting their financial management strategies to maintain their financial health.
To combat rising costs, 42% of businesses are increasing their prices, while 19% are using personal funds to cover business expenses, particularly among smaller businesses with annual revenues below $100,000.
To further manage challenges, 21% are reducing staff hours and 16% are negotiating faster payments from clients.
Adrienne Begbie (pictured above), managing director of Prospa New Zealand, observed the broader impact of economic uncertainty.
“We are seeing a fundamental shift in how SMEs approach their financial planning and risk management,” said Begbie. “The current environment is prompting businesses to rethink their funding strategies and adopt more resilient practices.”
SMEs exploring alternative funding avenues
Faced with these economic challenges, over half of small businesses (58%) plan to invest further into their business to generate future cash flow.
However, awareness of alternative lenders remains low, with 19% of SMEs likely to consider alternative lenders for business loans in the coming year.
Interest in alternative lending is driven by the need for features that traditional lenders may not offer, such as faster access to funds (29%) and quicker approval times (24%).
Despite low awareness for alternative lenders, 16% of SMEs are actively seeking professional advice about their business finances.
Advisers can provide essential guidance for business owners on accessing and leveraging new solutions. The majority (around 70%) of Prospa’s settlements in New Zealand originate from their adviser channel, with 55% of adviser business for Prospa’s Line of Credit product.
Prospa’s Business Line of Credit offers small businesses ongoing access to funds, where they can use and reuse during uncertain economic conditions and only pay interest on the funds they draw down.
Begbie underscored the importance of this advisory role. “Advisers are more important than ever in helping businesses navigate today’s complex economic environment,” she said. “Year on year, we see more of our business coming through our adviser channel.
“It’s clear that as economic times become more uncertain, business owners are looking for trusted, professional guidance to help them find solutions in an otherwise stressful time.”
