Kiwi small businesses are approaching the upcoming Government Budget with cautious optimism, hoping for tangible support that will help them thrive in a changing economic environment, according to the latest Prospa SME Sentiment Tracker Report.

Nearly half of New Zealand’s SMEs (49%) say they lack confidence that the May 22 Budget will deliver meaningful support for small businesses.

Opinions on government support are mixed, with one quarter (26%) of SMEs agreeing that the current government’s actions have been beneficial for small businesses.

In contrast, 37% disagree, but they’re clear on what would make the biggest difference: tax relief and reduced regulatory barriers.

Two in five (40%) SMEs acknowledge that the government’s budget announcement has a significant impact on their business success, underlining the high stakes many entrepreneurs associate with this year’s Budget.

Adrienne Begbie, Managing Director of Prospa NZ, says, “The upcoming budget is clearly important to small business owners and what we’re hearing from them is a desire for practical changes that would make a difference to their day to day operations.”

Tax relief and less red tape on SMEs’ Budget wish list

When asked which Budget initiatives would have the biggest positive impact, SMEs overwhelmingly pointed to tax reform (39%) and removal of bureaucratic red tape (25%). This comes as government taxes ranked as the highest cost among SMEs, cited by 22%.

“SMEs are the backbone of our economy, and merit targeted support to continue thriving. By removing unnecessary barriers, SMEs can unlock growth and reinvest in their people and products,” Begbie adds.

Confidence in business health remains high

Despite a challenging economic climate, a majority (57%) of small businesses currently rate their business health as “good” or “very good.”

However, managing cashflow remains an ongoing challenge, with 59% of small businesses having three months or less in cash reserves, and nearly a quarter (22%) holding less than a month’s reserves.

Further challenges include reduced consumer spending, difficulties finding and retaining qualified staff and intense market competition exacerbated by e-commerce, AI disruption and large competitors.

Following taxes, SMEs listed staffing and recruitment (15%) and inventory or raw materials (12%) as top costs for their business. Marketing spend has notably risen from 5% to 9%, whereas fuel costs have eased from 10% to 5%.

The future outlook is steady, with one-third of SMEs remaining confident about their immediate and longer-term future. Looking ahead, 43% expect next year’s profits to remain stable, with 35% expecting an increase.

However, expectations about market conditions have softened, with 44% anticipating improvements, down from 55% previously. Uncertainty is also rising, with 37% unsure about market conditions, up from 29%.

“The reality is that SMEs are doing a great job controlling what they can. Their internal confidence is strong, but like many Kiwis, they’re keeping a close eye on broader economic signals,” says Begbie.”

Increased appetite for external funding

In response, more SMEs are open to seeking external finance to manage cash flow or invest in growth.

Three in ten business owners (30%) said they are likely to access external funding in the next 12 months. A majority (55%) of SMEs say they have some confidence in non-bank providers like Prospa to deliver tailored finance solutions.

“Small businesses are becoming increasingly savvy about their options. With the right funding, many are ready to take the next step in their growth journey,” says Begbie. “It’s encouraging to see this shift as it shows confidence and capability is still very much alive in the SME community.”