One in four small businesses say higher power bills are having a greater impact on profitability than soaring fuel costs or the rising cost of trading stock according to OnDeck research.
- 66% of small businesses nationally say they are being impacted by rising electricity bills.
- The impact of rising power bills is having the greatest impact in Tasmania, where 87% of small businesses are feeling the pinch of rising electricity costs.
- 25% of small businesses say higher power bills are having a greater impact on profitability than rising fuel costs or the increasing cost of trading stock.
Escalating power costs are having a significant impact on Australia’s small businesses according to new research by OnDeck Australia.
Two-thirds (66%) of small businesses nationally say they are being impacted by rising electricity prices. The impact is greatest in Tasmania, where nine out of ten (87%) small businesses report being impacted by escalating electricity costs.
For one in four (25%) small businesses, soaring electricity bills are having a greater impact on profitability than rising fuel costs and the increased price of trading stock.
Mr Cameron Poolman, CEO of OnDeck Australia, says, “Australia’s small business community is facing rising costs across a number of fronts. But there are steps businesses can take to mitigate the impact of rapidly rising electricity prices – a cost that can be a significant overhead.”
Three strategies for small businesses to save on electricity costs
1. Shop around for a new power provider
Industry research indicates that just one in 10 businesses have switched power providers to save on electricity costs.
Small businesses can compare different power providers by accessing a number of websites, including:
- Energy Made Easy – for small businesses in New South Wales, Queensland, South Australia, Tasmania and the ACT
- Victorian Energy Compare – for small business in Victoria
- Power and Water – for business in the Northern Territory
- Economic Regulation Authority – for small enterprises in Western Australia.
2. Install solar systems
Small businesses that opt to install solar power may be eligible for various government grants and rebates to help minimise the cost.
The cost of a solar system may also be eligible for the instant asset write-off, which allows businesses to immediately deduct the full cost of all new asset purchases until 30 June 2023.
Mr Poolman said, “Making the switch to solar doesn’t just reduce electricity costs, it also improves the eco-credentials of a small business.”
3. Replace ageing plant and equipment
“Now is the time for every small business to review the energy efficiency of their plant and equipment – everything from air conditioners and refrigeration units through to manufacturing machinery,” said Mr Poolman.
“Electric motors account for nearly 30% of total electricity consumption in Australia across all industries. Sustainability Victoria says upgrading to a high efficiency motor can save a small business more than $10,000 in annual running costs,” added Mr Poolman.
Fast and efficient funding to help slash power bills
Small businesses are unlikely to enjoy a reprieve from rising electricity costs any time soon, with Federal Treasury pointing to a 30% jump in electricity costs in 2023.
This comes at a time when many Australians are about to hit a “mortgage cliff” – the end of a very low fixed rate home loan, and the ensuing transition to a far higher revert rate.
The Reserve Bank of Australia (RBA) says 880,000 fixed rate home loans, worth a total of around $350 billion, will reach the end of a super-low fixed rate in 2023. The central bank has observed, “These (fixed rate) borrowers will face very significant increases in loan repayments.”
The uptick in mortgage repayments is likely to add to the pressure of higher energy prices facing the small business community.
Mr Poolman noted, “Many small business owners are likely looking down the barrel of higher rates for their own home loans in 2023. But the full impact of Reserve Bank rate hikes may not be felt until fixed rate loans reach their expiry date in 2023, and this has the potential to recalibrate household spending more broadly, which could have a substantial flow on effect to the small business sector.”
Mr Poolman said, “I urge small businesses to act now to reduce their exposure to higher power costs and other expenses.
“OnDeck offers funding for a range of business-related costs, and applications for OnDeck’s Lightning Loans up to $150,000 are able to be processed in as little as one hour, with funding provided to approved applicants in as fast as two hours.
“This element of speed can allow a small business to act fast, and take up options such as installing a solar system, and/or replace power-guzzling machinery and equipment.
“This has the potential to improve a business’ bottom line, and acts as a valuable hedge against future electricity price hikes ” concluded Mr Poolman.
Small businesses can apply directly to OnDeck or enquire through their broker.
OnDeck Australia is the proven leader in transparent and responsible online lending to small business. Since launching in Australia in 2015, OnDeck Australia’s focus has always been on supporting small businesses with access to fast, efficient unsecured finance.
Today, OnDeck Australia offers a wide range of term loans customised for small business owners’ needs. OnDeck Australia is focused on taking the friction out of business lending offering unsecured business loans from $10,000 – $250,000 across 6 – 24-month terms. We’ve helped thousands of small businesses across a range of industries access funding quickly and easily, while maintaining a 5-star TrustPilot rating.
In 2021, OnDeck Australia launched The KOALA Score risk-prediction model that draws on big data, predictive analytics, plus data from multiple credit reporting agencies to enable more Australian small businesses to be approved for a commercial loan.
In 2021, OnDeck Australia also launched Lightning Loans, which enables the decisioning of loans up to $150,000 in as fast as 30 minutes, and funding in as fast as two hours. For more information, visit www.ondeck.com.au
About the Research
The independent research was conducted online in November 2022 by Octopus Group across more than 1,000 small business owners Australia-wide.
+61 (0) 411 578 818