A fifth of Australian small business owners have been forced to use personal credit cards on their business’s energy bills as prices rise before the dust of the pandemic is shaken off.

Research commissioned by the Council of Small Business Organisations Australia (COSBOA) found the financial pressures faced during the COVID pandemic left 32% of Australia’s 2.4 million small businesses in ‘energy hardship’ – struggling to pay their power bills.

More than half of these business owners (55%) have found their personal finances worse off as a result, while 50% reported their business was in a worse financial position due to these challenges.

In response to this energy hardship, 21% of business owners used their own credit cards to cover expenses.

Additionally, 33% delayed their bill payments, 23% relied on government assistance to settle up, and 22% negotiated payment plans.

“Right now, small business owners across the country are grappling with how to pay down legacy bills leftover from COVID shutdowns and slowdowns,” COSBOA CEO Alexis Boyd said.

“It’s a double hit, as they are trying to rebuild right as operating costs such as petrol prices and electricity are skyrocketing, supply chains are significantly impacted, and an acute worker shortage makes it nearly impossible to grow revenues.”

Ms Boyd noted that half of Australia’s small businesses are yet to return to full operational capacity in the wake of the shutdowns, and further support is needed to get this segment of the economy fully up and running.

Financial stress a major health concern

A 2020 report by the Department of Industry, Innovation and Science found small business owners were more likely to suffer mental ill health than their larger business peers, with almost a

third reporting they’d received a diagnosis for depression, stress or anxiety in the preceding 12 months.

The main cause of these health problems were financial concerns and worries about how they might affect business owners’ personal lives and families.

Michael Davidson, CEO of alternative small business lender Propell, said financial-related mental health concerns are worryingly common in Australia, and rigid lending practices are making matters worse.

“We get business owners coming to us all the time desperately needing help to manage their cash flow. Most of the time they’re in good financial health but don’t have the liquidity they need to buy new equipment or cover surprise bills,” he said.

“Effectively they’re good for the money, they’re just not good for the money at that precise moment – and if they can’t sort out a solution it could mean the end of an otherwise healthy and growing business.

“Going through conventional banks for financing can take weeks to get approved and there’s no guarantee that approval will come. Meanwhile, there’s a real person somewhere in Australia tearing their hair out and losing sleep, wondering whether they’ll still have a business in a few days’ time.”

It’s one of the problems that Mr Davidson set out to fix with Propell, which allows business owners to access lines of credit up to $250,000 on a 6 or 12-month basis.

After completing registration (a process that takes only five minutes and requires no paperwork), Propell’s users can access lines of credit between $2000 and $250,000, with interest only paid on the money that clients actually spend. 

And in the past month, the company has released a new Business Loan product, offering more competitive rates than the credit lines for borrowers needing between $5000 and a quarter of a million, over a fixed 12-month term.

Additionally, small businesses can access multiple other financial services starting using Propell’s automated, online system – including a free business analytics tool that assesses their financial health, offers insights and establishes a borrowing limit.

To stay up to date with Propell’s news and announcements, register your details here.

Reach Corporate provides Corporate Advisory Services to Propell Holdings Ltd and has been engaged by them to manage their investor communications and may receive fees for its services.

Sources:

• www.cosboa.org.au, Small Business Power Research Report
• www.cosboa.org.au, New Research on Small Business Power Bills
• www.industry.gov.au, Small Business and Mental Health: Supporting Small Business when they are Facing Challenges 
• Propell, Keep your business moving forward
• Reach Markets, How inflation is creating strong tailwinds for fast-growing Aussie lending business
• asx.com.au, Propell Launches Business Loans