Company Interview / Lending amidst the fuel squeeze

Key points:

SMEs face rising costs from both inflation and surging fuel prices Small transport operators struggle to pass on higher costs, risking insolvency Large companies including Linfox, Coles, and Woolworths have more pricing power Demand for asset-based finance from non-bank lenders is increasing

Australian businesses are contending with rising costs as oil prices surge due to conflict in the Middle East and stubborn inflation, according to James Beeson from Earlypay. Beeson highlights that the Reserve Bank of Australia is expected to raise interest rates again, compounding challenges for small and medium-sized enterprises (SMEs) already hit by higher insurance, labour, and compliance costs. Beeson points to Creditor Watch data showing that 1 in 12 road transport operators have closed in the past year, with remaining operators struggling to pass on fuel costs, especially those in the competitive small business sector.

Beeson observes that large transport firms, such as Linfox, may more easily pass on increased expenses to major clients like Coles (ASX:COL) and Woolworths (ASX:WOW), while smaller firms face tighter margins and escalating insolvency risks. With no immediate sign of relief, Beeson urges businesses to stress test their supply chains and maintain close relationships with both suppliers and customers to remain flexible in payment terms and cash flow management.

In the current environment, Beeson stresses that non-bank lenders like Earlypay provide vital support by lending against assets such as invoices and equipment, offering an alternative to traditional bank lending. An ongoing surge in finance demand from SMEs signals widespread efforts to prepare for continuing economic volatility.