New research by fintech Hnry revealed that Australia’s 1.5M self-employed workers are being hit hard by tight lending conditions.
The latest Hnry Sole Trader Pulse reveals that high-interest rates, soaring inflation, and the intransigence of financial institutions has adversely affected the financial health of tradies, freelancers and consultants across the country.
The survey also found that 41 per cent of sole traders have tried to secure additional funding in the past three months alone as the cost of doing business has skyrocketed and wages and pay rates have not kept pace with inflation. Over the longer term, half of those who have sought to secure funding said they were turned down for a loan or had difficulty securing funding primarily because they were self-employed.
The need to borrow comes as 70 per cent say they are paying more for supplies and services at a time when pay rates are not keeping up with inflation. At the same time, half say their net income was the same or lower in the quarter ended 31 March compared to the previous three months. Because of this, 63 per cent say they are saving less or having to eat into their savings just to stay afloat.
Despite the tough economic conditions, a majority of independent earners feel they are “doing OK” and are more optimistic about the future prospects for their business than at any time since the survey began just over a year ago. In addtion, majority believe they are better off financially than they would be working for somebody else (48 per cent vs. 24 per cent), citing the work-life balance and degree of freedom that self-employment brings.
“The survey demonstrates the continued resilience of the army of 1.5 million Australians who work for themselves,” Karan Anand, Hnry Australia Managing Director, said. “They remain optimistic in the face of the toughest economic conditions in a decade. Sole traders are doing all they can just to stay afloat amid the most challenging business conditions in two decades. But the difficulties they face trying to access finance are concerning.
“The banks need to ease the unnecessarily high burden of proof a sole trader must show to demonstrate their income,” Anand added. “This is red tape ripe for the cutting and should be made a priority. At the same time, there may be scope for the government to look at extending the minimum wage and other basic terms and conditions it has promised gig workers to all independent earners.”
Beyond the economy, the survey finds sole traders are still drowning in paperwork as they say that they need to set aside the equivalent of a day a week to manage their tax and financial affairs and spend an average of $278 a month or $3336 a year on accountants, planners, advisers and software.
