Small business owners have been under pressure in recent years. High interest rates, soaring power bills, low consumer sentiment and a dip in retail spending all mean SMEs need to be resilient.
But it's not all bad news. With rates now coming down, inflation potentially under control, and the election behind us, there might be an opportunity ahead for SMEs to make a move.
Beau Bertoli, co-founder and Chief Revenue Officer of Prospa, talks to Sean Aylmer about the state of small business, and the reason for optimism in the sector.
Prospa is a supporter of Fear & Greed.
Welcome to the Fear and Greed Business Interview. I'm Sean Aylmer. Small business owners have been under pressure in recent years. Their rise in cost of living, high interest rates, soaring power bills, low consumer sentiment, and a dip in retail spending means SMEs need to be very, very resilient. But with rates now coming down, inflation looking like it's under control, and the election now behind this, I wanted to take a more positive look at the state of small business. Well, I hope it's more positive as we head towards the end of the financial year. What can SMEs be doing to set themselves up for a successful twenty twenty six fiscal year. What are the challenges they're facing? What are the big opportunities. Bo Bertolli is the co founder and chief revenue officer at Prosper, A great supporter of his podcast. Bo, Welcome to Fear and Greed.
Thanks for having me. Great to be here.
So let's set the scene. How tough has last couple of years been.
Look, it's been a really tough couple of years. I think you touched on inflation being generational, highs TRSs rates, you know, well over four percent. It's been really, really tough for small business owners in particularly their costs wages have gone through the roof for them. So it's been a really difficult couple of years. And I think what we're finding now as we sort of head into the middle of twenty twenty five is that business owners they are resilient, but it's also been a bit of a survival of the fittest that we're now finding the businesses who are still here in the middle of twenty five. For the ones that have been able to adapt, they've adjusted their cost structures, they've got their pricing model on their margins right, and they've weathered the storm, so to speak, so they're almost at the other side of it.
Are there some sectors that have struggled more than others?
Definitely. I think if you look across the Australian economy, the areas that have had the most difficult time hospitality, retail, and probably the building and trade sector. And if you look at things like insolvency rates, they've been again generational highs. It's been those three sectors that have been most impacted in the small business arena, and again, I think it's the resilience of small businesses within those industries where we've seen consolidation start to take place, we've seen business owners looking for opportunities within these difficult times. On the flip side, there's been industries that have actually performed really well in the last twelve to twenty four months. For example, in professional services, that's been an area that we've seen really strong growth. Manufacturing as well, and wholesale has been another area that's done very well. So it is a bit of a tale of two stories across the Australian economy. And I think over the last you probably six months, with the first interest rate cut earlier this year, a second recent cut now as well, we're in a really good position to create I think the next platform of growth for the Australian economy for small businesses.
So let's talk about that. We're at a point from what you just said then both not quite the survival of the fittest, but the fittest have done best. They've come through or they've gotten fit as a result of everything that's gone on. How are they feeling about twenty twenty six. Do you think there's more optimism out there?
I think there is, And again you took us farther the fittest. It is a genuine thing in business that most small business owners they are running right to the edge.
Now.
One of the bits of researcher we've conducted recently showed that the majority of small business owners have less than ninety days of business expenses as cash in the bank account, literally three months of runway. So it is really important that business owners, I guess, see these opportunities that are now starting to emerge in the economy. I think looking forwards in terms of optimism, it's definitely coming from a place where interest rates are coming down, Unemployment is relatively stable, consumer growth, while it's not booming, it's relatively stable. We've got the election result out of the way as well, which is good for certainty around our policy and where to So I think all of the platform ingredients are there now for business owners to take advantage of those opportunities that are going to be coming over the next twelve months.
In a sense, how do they take advantage of the opportunities. I know it depends on what sector they're in, and someone do better than others. But as you sit here today, where abounds, I mean, watch the proactive steps business owners should be taking to be thinking about these opportunities to be able to grasp them when they arrive, or even going out and finding them. Yeah.
Sure, I think if it as fitter, faster, stronger, they're my three kind of ideas for a business owner. And when we think about being fitter, how is it you can cut some waste in your business? And every business owner has got it. Can you trim down the fat a little bit in terms of saving just a little bit more to your bottom line? How do you get faster? So there's a lot of different ways you can get faster as a business owner. At the end of the day, the customer is what's driving speed in our economy and I think customers, all of us are guilty of this. We are, so I guess we value speed of outcome, whether that's a quick answer and a credit application with prosper or whether it's buying something online and getting it delivered the next day or that day. There is this demand now for experiencing in terms of experience, and that's a really important thing to get right, and that takes things like investing in technology to be able to actually move faster as a business and be more productive. And then how do you get stronger. Well, that's actually building up your balance sheet. And Prosper one of the things we're really proud of is that we've funded almost five billion dollars into this strain economy for small business owners and we know how valuable having some extra working capital in your business can be. So strengthen your balance sheet. Take advantage of an opportunity, which could be to consolidate part of the market that you're in. How do you do that? You need funding to do that. Take advantage of opening a new site, how do you do that? It needs money to actually go and open that side. Perhaps you want to expand into state there's now an opportunity to open up in a different part of Australia. How do you do that? Again, it takes money. So this is one of the things where I think business owners need to understand there are options out there, not just the big banks, but outside of the big banks, companies like Prosper where we can actually help you take advantage of those growth opportunities, which nine out of ten times takes money to actually get advantage of.
I talk a little bit about more about that, but we'll take a quick break. My guest this morning is bo but totally co founder of Prosper. Before we went to the break, you were talking about the need for funding to take advantage of opportunities just Prosper itself. Where's your funding come from? Just like a one ah one on prosper sure.
So Prosper as a business we started thirteen years ago and we are a self funded on balance sheet lender, so we basically source our own capital and we provide that capital there to small business owners. We have loans between five thousand dollars up to half a million dollars. We have revolving line of credit products as well that operate like overdrafts. So it's a really broad range of products that we offer and we fund almost every industry and geographical area in Australia.
And so what size of the loans that you're talking about in the overdrafts?
So from five thousand dollars up to five hundred thousand dollars.
Okay, And is that an area how I mean, I'd imagine the banks are fairly aggressive in that area. That's a question.
No, not really, because I think the banks they're very good at certain things. So they're very good at writing mortgages, very good at institutional and corporate banking. But to a bank, a small business is someone looking typically to borrow two million dollars. Now, whereas we're looking at a business owner, it's someone who's doing two million a year in revenue. That's a small business owner. They might only need fifty one hundred, two hundred thousand dollars. So what we've I guess innovated a prosper. It's a way for those businesses out there that need a quick, almost immediate answer to am I eligible for funding or not? We can turn applications around in less than twenty four hours and they can have the funding almost overnight in most cases. So it's a really powerful proposition for business owners. When you see an opportunity which often comes up last minute, and you need the capital to take advantage of it, well where there and we can get you an answer really quickly on whether or not you can get that capital.
So if I'm asking for a loan from you, what are you looking at from me? Though? What are the characteristics that you want the small business to have so that they can get the loan? What are you looking for?
So for us, it's really looking at the cash flow of the business. So the peanut and the balance sheet are important documents, but that's actually what the banks typically will look at. So we prefer to understand the cash flow of the business, and what we've found is that that allows us to lend the right amount of money and in case there's more money to small business owners than what perhaps the financial statements are supporting. So it's really really valuable for us to have a good insight into who the business owner is, what industry you're in. The whole application process for Prosperous Online takes about ten minutes to fill out and off. It's the provision of your bank statements, so just some transaction information to understand how the cash flow of your business is working. With that information, we're able to provide an answer, as I mentioned earlier, over within twenty four hours, and that's a really great experience for business owners.
Okay, I want to talk about tech. Prosper does both tech and finance based solutions? Do SMEs use tech? And then I want to go into AI, So just don't talk about AI yet. I'm just interested in whether SMEs, whether they are people who just don't have time to invest in technology or to understand it whether they do and actually drives their business.
So there's two groups of customer when it comes to technology. I think one hundred percent of business owners use technology in some way, shape or form. So they've got an email address, they've got some type of yeah phone, or even some type of basic software that they might use, whether that's Excel or word or something like that. Then there are the business owners who really vyue technology and they're using it to try and enhance their customer proposition or run their business far more efficiently. So there is this group of small business owners that really care about technology and they're constantly trying to think about how can I make my website experience better? How can I make my product experience better. You might be a plumbing business and you're thinking about how can I invest in telematic so I can plan out the routes of my vehicles better. So there's a lot of different ways to invest in technology, and that's relevant for a pocket. But then there's a very large pocket of business owners that don't invest in technology. In fact, one stat that surprised me in the last few years is that forty two percent of business owners don't even have a website, let alone a social presence. So that's a really big insight into how much opportunity can still be out there given that there are so many businesses that are not even really active in the digital world that we live in today.
I mean, they're not investing in AI either. What about the third that are investing in technology? Is AI being implemented in small business at the same pace that is in big business?
I mean, first, I'm not sure that's being invested in a big business at a fast enough pace at the moment, but I think at the small end of town it's even worse. So I think a lot of people are playing around with some of the basic models like chat, GPT and almost using it as an advanced search engine. But you're really the utility of AI is how can you bring it into the operations of your business and how can you invest in it in the customer experience whatever that product experience happens to be. So I again, I think there's a whole spectrum of small business owners that are even understanding and aware of what AI can actually do for a business. I think there's a short window, maybe it's only twelve or twenty four months where business owners need to get on board, and they need to really understand how AI can help their business. It's not this scary foreign thing. It's actually a really easy technology to start playing around with and use to about website development. I mean, you can literally use an AI tool now online to build a website in ten or fifteen minutes using natural language. You don't even need to know how to code or anything like that. So there are really simple things that you can now use that could really help a business owner get forward. And I think it's really important that business owners and as a community we try to educate more business owners around the value of not just AI, but general technology, because we know how valuable it is at opening up productivity, at driving more profit and revenue through the economy, and ultimately creating more jobs. So super important that we keep investing in it. So thank you for talking to Fear and Greed. Thanks for having me the totally co founder.
And chief revenue officer of Prosper. This is the Fear and Greed Business Interview. Join us every morning for the full episode of Fear and Greed. Daily business years for people who make their own decisions. I'm sure I Elma enjoy your day