More than a third of business owners say they will need to borrow or use savings as confidence plummets

A new report has revealed many small businesses believe cash flow is going to run out over the next six months, with business confidence almost as low as when the COVID-19 pandemic began. 

According to MYOB’s Business Monitor Survey, nearly 40 percent of businesses will need to borrow more to stay afloat or dip into their savings. 

Thirty-eight percent also said a recession would mean cost-cutting, so it would affect not just business owners but the jobs of people who work for them.   

More than a third of business owners say they will need to borrow or use savings as confidence plummets
Photo credit: AM

MYOB spokesperson Jo Tozer told AM the latest business confidence data is "very comparable" to statistics seen during the height of the COVID-19 pandemic.

"It's been dipping confidence over the last 18 months or so, but particularly when we came into the trading season at the end of last year, we saw it dip again," Tozer said. 

"It dipped at the beginning of COVID, rose a little bit, but certainly went backwards again at the end of last year."

She told AM inflation is the main factor driving business confidence down. 

"Certainly inflation is having an impact on the confidence of these businesses, and so [the] rising cost of doing business, exactly as you've spoken about in wages, but also fuel costs and supply costs, really having an impact."

And as Aotearoa battles inflation, Kiwis have been encouraged to curb spending to help cool the economy, which Tozer says is affecting businesses too. 

"They're (Kiwis) being more careful with what they spend, and so revenue is also taking a hit for these businesses."

Tozer told AM small businesses "care passionately" about their employees, but with rising costs, job losses could be on the cards. 

"That'll be a last resort for them, for many that we've spoken to."

Thirty-eight percent of business owners said within the next six months they will have to take out a loan or dip into their personal savings, which MYOB wasn't surprised by, as confidence has continued to dip over the last six months.

"[It's] really, really concerning to see so many businesses now where the confidence has run out, and the only option for them now is to dip into their savings, or to finance their businesses to continue to trade."

Tozer said about 37 percent of business operators surveyed said they cannot continue to trade as they are.

"Now how many of them will close, we don't know. But what we do know is that they'll be tight on their own personal finances to achieve that."

Tozer told AM the impacts are hitting industries far and wide, but it's hospitality and retail that are particularly being struck hard. 

"They really rely on consumer spending to stay afloat."

She says SMEs (small and medium-sized enterprises) are "calling for reprieve".

"What they're really strongly asking for at the moment is for reprieve on cost, and so they understand consumer spending will be tighter, and they will find it harder to bring revenue in," she told AM. 

"And so what they're really looking for now is how to reduce costs in the overheads in their business."

Watch Tozer's full interview above.