“The life of a small business and its owner is not like that of a corporate business. The two are intertwined,” Bruce Billson said.
“And this becomes quite challenging [with rate rises] and explains why the forecast of small business loan defaults didn’t materialise to the level it was expected. The economists missed the connection of small business owners to the family home.
“Almost half of all small business finance is secured by personal assets and overwhelmingly that is the family home.
“So, there is a strong motivation for small and family business owners to meet their financial repayments or there would be profound impacts on their family’s life.”
With consumer confidence now also plummeting Mr Billson said there was already evidence of patterns of behaviour changes.
“The retail trade month-on-month is trending down, after consecutive months of rising,” he said.
“And what we are hearing is people are dialling back on discretionary spending and focussing on their view of what is essential, so they are cutting back on things like eating out and takeaway coffees.
“But spending on hobbies, kids and pets is still holding. The interest rate rises impact and influence spending power so they will also impact small businesses as well.
“Notwithstanding that, businesses are already feeling direct implications. Small business finance cost is up, and serviceability challenges are making accessibility more challenging.
“There are also other compounding influences around energy cost inputs, fuel for transport and reports of substantial step-ups in occupancy costs with rents which are really impacting on some businesses as well.
“There are choppy waters ahead for a number of small businesses as households adjust and that will reverberate through the sector.”
Although the worst of the pandemic lockdowns and regulations are now in the past, Mr Billson said small businesses are facing challenges that are equally as tough now.
“One of those is the Australian Taxation Office now returning to more regular and traditional recovery activity,” he said.
“And some businesses in tenancy arrangements, where the financier was accommodating in COVID-19, are facing make-good on those on top of the immediate pressures in their business.
“What you’re seeing is that business owners are having to pivot again. Post-COVID-19 all the headwinds they had are still there like staff challenges.
“Often it is the small business owner who has to fill in the gaps and find work-arounds.
“Many are exhausted from filling in those gaps and making up the team where they can’t get the talent they are looking for.
“Supply chain pressures are being felt sharply, and while many small businesses have seen good opportunities to grow, they haven’t been able to because of supply chain pressures.
“We are urging small business owners to think about things like digital engagement. The business of running the business is not an exciting part of being a small business owner but it is a vital part.
“There is good technology around to help and those tools are important at this time so business owners have maximin bandwidth to bring in things that add value to their business and work on keeping their own spark and mojo in terms of these headwinds.
“We are also encouraging small business owners to reflect on financial trajectories within their business and turn to trusted advisers to see what adjustments they may need to make to deal with changing consumer behaviour and what contingencies and continuity steps they can take to secure longer-term interests.”
