Aussie sole traders denied loans when they need them most

- April 20, 2023 2 MIN READ
loan application rejected

Australia’s 1.5 million sole traders are being hog-tied by strict lending conditions, with large numbers being knocked back for a loan because they are self-employed, Hnry’s quarterly Sole Trader Pulse report reveals.

According to Hnry’s latest national survey of independent earners, Aussie tradies, freelancers and consultants are being severely squeezed by high interest rates, soaring inflation and the hard stance of financial institutions’ lending criteria.

The report found 41 per cent of sole traders have tried to secure additional funding in the past three months alone. While over the longer term, half of those who have sought finance said they were turned down for a loan or had difficulty securing funding primarily because they were self-employed.

“Unnecessarily high burden of proof”

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 skyrocketing inflation.

Half say their net income was the same or lower in the quarter ended 31 March compared to the previous three months. And 63 per cent say they are saving less or having to eat into their savings just to stay afloat, with many solopreneurs reporting they would be severely stretched to meet an unexpected business expense, such as a vehicle breaking down or a key piece of infrastructure needing repairs.

Hnry Australia Managing Director Karan Anand said, “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. This is red tape ripe for the cutting and should be made a priority.”

Solopreneurs still value independent earning

Despite the tough economic conditions, a majority of solopreneurs 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.

They also continue to agree that they have made the right decision in choosing to work for themselves.

More believe they are better off financially than they would be working for somebody else (48 versus 24 per cent), citing the work-life balance and degree of freedom that self-employment brings.

Anand said, “The survey demonstrates the continued resilience of the army of 1.5 million Australians who work for themselves. They remain optimistic in the face of the toughest economic conditions in a decade.

“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.”

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