Interest rates don't just hit households. Small business is feeling the pinch

Small businesses shop around for more credit as economic pressures mount Fri 24 Jul 2026 at 4:58am In short: Small-to-medium sized businesses have had a challenging year, after facing rising fuel prices, interest rates and inflation on top of regulatory reforms such as pay day super, changes to credit card surcharges and the abolition of junior pay rates. Insolvency rates are beginning to rise, credit shopping is up and more owners are exiting businesses. What's next? The small business council is seeking more governmental support such as raising the tax threshold for the instant asset write-off. Nestled between Longreach and Yeppoon in central Queensland's vast red expanses sits the hamlet of Barcaldine. Tourists are drawn to the Garden City of the West because of its historic roots at the start of the Labor movement and its lush, leafy streets drinking from the Great Artesian Basin below. Jeff Bowman owns the local tourist shop and cafe and says when war broke out a world away in Iran in March, they seriously considered closing up shop for the entire six-month dry season. With petrol prices skyrocketing, he said the "fear factor" kept tourists away, who grimaced at the hours-long road journey to take in the region's vistas. "As soon as they mentioned the word fuel rationing [tourism] completely stopped. It was just phenomenal. People were frightened,"he said. "We were 42 per cent down, which is quite dramatic for us." Mr Bowman is one of the many small and medium business owners around the country bracing for the end of the fuel excise in August and worried what the re-escalation of hostilities in the Middle East will mean for their business. For the small operation, it is not just the loss of income that has hit them; it is also the rise in costs, including electricity to run cafe equipment and, most importantly, freight to their remote location. "We cannot buy from [some suppliers] because of the freight costs," he said. It has been a particularly tough year for small to medium-sized enterprises around the country with a combination of oil prices, interest rates and inflation all twisting the screws on operators. That has been on top of new or imminent regulatory reforms like payday super, changes to credit card surcharges and wage decisions like the abolition of junior pay rates. It comes as consumer sentiment tanks and businesses deal with the usual bill increases such as rents and wages. Small bank lender signals SME stress Fears about the plight of small businesses came to a head in June with a profit downgrade from small-to-medium enterprise lender Judo Bank. It was on the back of three troubled loans adding up to about $75 million, including one to a Sydney window manufacturer, a Canberra financial planner and a Victorian construction industry business. Insiders told the ABC each of the three loans had unique issues, but the profit downgrade and needing to put $20 million aside to cover the bad debts was enough to worry the market. Judo's shares dived 46 per cent, wiping $700 million off its share market valuation in minutes. Credit agency Equifax said overall the SME sector is resilient, but there are pockets of distress. While starting from a low base, small business insolvency rates are starting to tick upward with a 13 per cent increase in the number of businesses going bust in the six months to May 2026 compared to the same period last year. More businesses are also pulling up stumps, with business exit rates up 37 per cent in the second quarter of 2026 compared to the same quarter in 2025. And businesses are taking longer to pay suppliers, with the number of firms taking 31–60 days to pay growing to 9.5 per cent in May 2026 compared with 8.3 per cent at the same time last year. Credit shopping is up Equifax's Brad Walters says there has been an increase in credit shopping among high-risk small to medium businesses, meaning owners are having trouble getting loans. This includes businesses in the construction, manufacturing, transport and logistics industries, or those with low liquidity. "For the high-risk small business community we've seen that trending up, and that's now at four times the rate that it is for their low-risk counterparts. That's really problematic," he said. "It can signify those businesses are approaching multiple funders or credit providers at the same time and can signal that they're finding it difficult to get ready access to finance,"Mr Walters said. Small businesses were also moving away from plans to expand, particularly in Victoria. "For smaller businesses we're actually seeing a flat line of their credit appetite. In fact, we're seeing a bit of a pullback in their interest around growth capital," he said. "That's really a reflection of their cautiousness in the current market, but also their concern around immediate cash flow given the pressures they're facing." Interest rates hurt businesses too For Victorian steel manufacturer Solidity, it is interest rate rises that really test their mettle. The company makes helical piles, also known as screw piles, which are part of the foundation systems in residential and commercial builds, and even transmission and renewable energy projects. "We're a debt company business so we have a pretty significant bank loan that allows us to operate the business, and that's at a variable rate," managing director Brodie Houghton said. "Every time the RBA increases the interest rate our cost of business increases pretty significantly." Solidity employs about 40 people, and its construction division also feels the impact of fuel price rises. "During April, when fuel pricing was at its highest, we saw an increase to the base cost of running that part of the business [by] about 30 per cent," he said. They are about to expand to a much larger site, but Mr Houghton said any support to SMEs like his was missing the mark. The rising price of steel is adding to costs at the same time as competition with cheap overseas imports heats up. "We've seen steel price increases about 4 per cent every two months," he said. "There's imported fabricated products coming into Australia at between 15 to 50 per cent lower prices than the lowest local bid." He said the loan rules for the government's Economic Resilience Program (ERP) were too tight and his company does not get priority on state-run building projects. The ERP was announced to give businesses access to zero interest loans to help those impacted by the fuel shock and other market disruptions. "We're really expecting there's going to be a real pinch over the coming months," he said. "The current period right now, it feels a lot like 2020. There's a lot of uncertainty." Instant asset write-off help Council of Small Business Organisations of Australia chief executive Skye Cappuccio said there were things the government could do, like raising the tax threshold for the instant asset write-off. "Currently the threshold for that for small businesses to access is set at $20,000, where we know that to really support small businesses to invest in the equipment and the tools that they really need to drive their productivity it needs to be much higher," she said. "Small businesses across the country are resilient, but times are tight and the pressures are really high. A lot depends on what happens over the next six months." Small Business Minister Anne Aly said in a statement the government was offering practical support including tax breaks, removing nuisance tariffs and free access to mandatory standards. "We're delivering over $3.8 billion in new measures that lower taxes for businesses and start ups," she said. She said reforms like payday super would benefit everyone, including 8.9 million workers, and made payroll management smoother with fewer liabilities accruing. "Good workers are critical to any successful business, and fair wages and super help businesses attract and retain the people they need," Ms Aly said. Jeff Bowman said he would just like to see remote businesses given more support to overcome the tyranny of distance. "We'd just like to be considered more. We need tourism in outback Queensland to continue growing," he said.