Small businesses across Australia are feeling the pinch, with complaints to the Australian Financial Complaints Authority (AFCA) hitting a record high in 2023-24. As businesses grapple with rising costs, interest rates, and cash flow struggles, many are turning to AFCA for support.

In total, small businesses lodged 4,466 complaints with AFCA in the past financial year—an increase of 17 per cent compared to the previous year. The growing number of complaints reflects the tough economic environment many small businesses are facing.

Rising financial difficulties

AFCA’s Lead Ombudsman for Small Business, Suanne Russell, explained the surge in complaints is directly linked to the financial pressures small businesses are under.

“This record number of complaints to AFCA reflects the pressure small businesses are under as they struggle to manage challenges with cash flow and financing, along with higher costs and interest rates,” she said.

Russell warned that the rise in complaints related to financial difficulties is likely to continue, as small businesses face an uncertain year ahead. “We expect financial difficulty complaints to continue to rise in the coming year,” she added.

She encouraged small business owners to have open conversations with their financial service providers if they are struggling. “We encourage small businesses to talk to their financial service providers if they are facing challenges, and we urge financial firms to adequately address requests from customers if they need help to get through temporary difficulty.”

Growth scams targeting businesses a concern

Along with financial difficulties, small businesses are increasingly falling victim to scams. AFCA reported 263 complaints related to scams, marking a significant 48 per cent increase. The scams mainly involve email compromise, where fraudsters intercept and alter payment details, leading to substantial losses—especially in high-value transactions like property settlements.

Russell explained why small businesses are particularly vulnerable to scams.

“With limited resources to dedicate to fraud prevention, and often larger amounts in accounts, small businesses could be vulnerable to scams,” she said.

Scams can have a massive impact on small business owners, both financially and emotionally. Russell stressed the importance of stronger protections from financial service providers.

“Scams are a growing threat to small businesses and can have a significant impact on business owners,” she said. “We believe financial service providers should enhance protections for their small business customers to help prevent these damaging losses.”

The government is already taking action to tackle the growing threat. Russell welcomed the introduction of the government’s Scams Prevention Framework, which aims to improve both prevention and response to scams impacting consumers and small businesses.

Bad lenders and dodgy loan terms  top complaints

While financial difficulties and scams are a significant concern, business loans continue to be the most commonly complained-about product. Complaints about business loans rose by 16 per cent in 2023-24. Other frequently complained-about financial products included business transaction accounts, commercial property, credit cards, and commercial vehicles.

Russell noted a sharp increase in complaints regarding the interpretation of product terms and conditions.

“This year we saw an 84 per cent increase in complaints around interpretation of product terms and conditions,” she said. “Again, we encourage financial firms to make sure they’re communicating clearly and effectively with small business customers.”

In the past year, AFCA successfully resolved 4,380 small business complaints and secured $20 million in compensation for businesses where complaints were upheld.

AFCA ready to help

The good news for small businesses is that AFCA provides an independent, free, and impartial service to help resolve financial disputes. Whether you’re facing financial difficulty, struggling with unclear product terms, or dealing with the fallout from a scam, AFCA is there to help.

If you’re a small business owner facing any financial disputes, it’s worth reaching out to AFCA for guidance and support. The service is designed to ensure that financial institutions are held accountable and that small businesses get the help they need to navigate tough times.