According to the latest Westpac Small Business Report in collaboration with Deloitte, Australian small businesses are looking forward to financial growth in the next 12 months because of improved economic and political certainty after recent tough conditions. However, many are reluctant to hire staff due to too many policies and procedures.
Although small businesses are matching the wider economy in growth terms, they are falling behind in increasing their workforces, with 31 per cent of respondents employing fewer people than 12 months ago.
The most common hurdles to hiring are financial (38 per cent), only needing help occasionally (28 per cent), and wages and penalty rates (24 per cent), suggesting that more support is needed across industry and government to help businesses break down employment barriers.
“Many small businesses faced tough conditions over the last six months with a slowing economy and tightening margin pressure. However, there is some light at the end of the tunnel which can help boost employment,” Westpac General Manager of SME Banking Ganesh Chandrasekkar says.
“Given recent RBA interest rate cuts, a boost in infrastructure spending and a better-looking housing market, many small businesses say they are optimistic about the coming 12 months.
“One way to boost confidence back into the market is to remove the complexities and challenges small businesses face when it comes to hiring. If every employing small business took on one additional staff member, that is 900,000 jobs. Even if we could create a fraction of that amount by removing employment barriers, it would make a big difference.”
To supplement household income, one third of small businesses have taken on a second job or ‘side hustle’, revealing that their most common fear is having no financial security. This is particularly common among non-employing businesses (41 per cent), female small business owners (40 per cent compared to 25 per cent of males) and industries feeling more exposed in the current environment such as agriculture (52 per cent) and the arts (45 per cent).
Many small businesses are taking advantage of the gig economy to embrace on-demand solutions that provide flexibility and easier access to casual employees, and it’s growing quickly, increasing 68 per cent in revenue terms in one year in NSW.
However, 20 per cent of small business owners have no income other than their business and 15 per cent would lose equity in their home if their business were to fail. The average small business household gets 63 per cent of its income from the business.
“This places an extraordinary amount of pressure on business owners, their families and employees, for the business to perform,” Chandrasekkar says. “With over half of Australian small business owners using their personal savings to establish their business, this can have a deep impact on their mental and financial wellbeing.
“At Westpac we approve 93 per cent of lending requests received. Despite this, two in three business owners do not request funding, leaving many small businesses cash-strapped. Before taking on a side hustle or putting undue stress on yourself, know that Westpac is here to help with $30 billion ready to lend to small businesses for the right investments.”
From the beginning of 2020, Westpac is expanding its unsecured lending offer to help more small businesses access funds to manage growth and cash flow when they need it most. It’s estimated an extra $10 billion will be available in unsecured, conditionally approved limits, without the need to put up other assets as security.