Martin Iglesias on what SMEs need to know
International Monetary Fund He kept his growth forecasts for Australia intact, predicting GDP increases of 2.1% in 2025 and 2.2% in 2027, even as Australia grapples with persistently high inflation that threatens to complicate the economic picture for businesses and investors alike.
With headline inflation currently running at 3.4%, well above the Reserve Bank’s 2-3% target range, Australian businesses face a delicate balancing act. Treasury forecasts suggest inflation will remain stubbornly above target until at least June 2025, creating a long period of uncertainty for companies planning major investments or expansion initiatives.
Inflation struggle
Martin Iglesias He has a unique understanding of the cascading effects of sustained inflation on business operations and funding strategies. As a Credit Analyst at Highfield Private with over two decades of experience in corporate banking, he has guided clients through various market cycles and inflation crises.
“Inflation is driven by the cost of living and the cost of living is increasing dramatically in Australia.” Iglesias’ statement is as follows:
“Monthly spending increased by approximately $1,000 per month, constraining customers’ borrowing capacity and offsetting future rate cuts.”
The factors behind Australia’s persistent inflation are multifaceted and deeply embedded in the domestic economy. Housing costs continue to be the biggest contributor to inflation, increasing by 5.9% annually, while food and non-alcoholic beverages increased by 3.3%, while dining out and takeaway food also increased by 3.5% due to rising wages and ingredient costs.
Comprehensive warning from IMF
The IMF’s report goes beyond Australia’s immediate inflation concerns, warning that global economic uncertainty could intensify if optimism about artificial intelligence wanes. The fund warns of a potential “prolonged correction” in stock market valuations, particularly affecting technology firms that have recently extended market gains.
This global environment adds another layer of complexity Australia’s small businesses drive financing decisions. The combination of domestic inflationary pressures and international market volatility requires a more nuanced approach to financial planning than many organizations typically use.
Strategic implications for Australian businesses
For mid-sized Australian businesses considering expansion or major capital investments, the current environment requires careful preparation. Iglesias has observed firsthand how inadequate financial planning can derail promising growth opportunities.
“Business owners are often more reactive about financing, so once they take the necessary steps, they go out and seek financing.” he says.
His advice to them is simple: “Don’t put the cart before the horse.”
Instead, he recommends that lenders focus on establishing sound corporate governance and financial management systems before approaching them.
Iglesias’ statement is as follows:
“What they need to focus on is managing their finances, which is something that many business owners, especially entrepreneurs and CFOs, overlook. They look at sales, how much they can sell, and customers, but they don’t look at things from a historically retrospective perspective.”
Lending environment
Despite challenging conditions, opportunities exist for well-prepared businesses. The proliferation of alternative lenders beyond the traditional banking system has created more options; But these come with some trade-offs.
“The biggest opportunities will be that you can access a wide range of alternative lenders and get their higher LVR (loan to value ratio).” Iglesias notes: But he is quick to point out the cost implications: “Alternative lenders, you pay a higher interest rate.”
Meanwhile, large banks are showing some flexibility. “Big banks are starting to be a little more flexible about moving to one-year-only financial statements for some certain types of applications.” Iglesias says. Previously, banks generally required two to four years of financial history.
Look ahead
What is important for businesses planning to grow in 2026 and beyond lies in comprehensive preparation and realistic expectation management. Tax compliance remains non-negotiable.
Iglesias warns:
“They can’t go to a bank where their taxes haven’t been paid, because banks get very nervous about it. If that’s the case, they won’t even think about it.”
The IMF’s steady growth forecasts suggest the Australian economy will continue to expand, but the path forward requires businesses to cope with persistent inflation, conservative lending practices and potential global market volatility. Those who approach financing strategically, with comprehensive financial documentation and net cash flow modeling, will be best positioned to take advantage of growth opportunities in this complex environment.
