Inflation continues to keep SME owners up at night, survey finds

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According to the most recent Banjo Loans SME Compass Report, 38 per cent of SMEs reported that inflation was the top issue keeping them up at night, while 46 per cent reported it was their largest barrier to growth.

“SMEs are balancing growth ambitions with survival strategies. Inflation is the dominant pressure, while cash flow concerns are intensifying, forcing businesses to prioritise viability over expansion,” the report read.

“And while inflation is clearly the dominant pressure shaping SME behaviour, cash flow pressures are intensifying for many. Many SMEs are prioritising viability and survival over growth.”

The report found that SMEs were cutting costs and hiking their prices in response to inflationary pressures. Over the past 12 months, 43 per cent reduced expenses while nearly half had raised prices for the first time since 2022.

Small business owners don’t expect the pressure to let up any time soon, with 67 per cent expecting inflation to continue limiting business growth over the next 12 months.

Cash flow pressures were also hampering growth, Banjo Loans found. Almost half (45 per cent) of businesses said they had delayed growth opportunities over the past year due to cash flow concerns.

Confidence had also softened heading into 2026, with 86 per cent of SMEs expecting to meet revenue targets, down from 89 per cent. Banjo Loans also found that businesses were more sensitive to interest rates, with 59 per cent of SMEs saying they would make business changes if rates moved.

The survey also identified signs of a ‘two-speed’ SME economy, with retail operators struggling more while communications, media and telecommunications businesses reported stronger cash stability and confidence.

In retail, 83 per cent identified inflation as a key barrier to growth, while 66 per cent said economic uncertainty was holding them back.

Banjo Loans also found that many SMEs were financially vulnerable, with half of Australian SMEs at risk of running out of cash within six months if new revenue stopped today. While 69 per cent could survive at least three months without income, only 19 per cent could operate for more than a year.

“Across Australia, SMEs continue to grow and hit revenue targets, but cash reserves remain tight and uncertainty is high,” Guy Callaghan, chief executive of Banjo Loans, said.

“The Compass data shows that SMEs are resilient but cautious and need to carefully manage finances as they navigate business in 2026.”

25 March 2026
Emma Partis
accountantsdaily.com.au