Navigating High Borrowing Costs & Sticky Inflation
Money’s still dear, margins are still skinny – here’s how to keep cash positive in 2025 without mortgaging the ute.
1. Reality check: rates came down – barely
Minutes from the RBA’s 20 May meeting show the board debated holding the cash rate at 4.10% but finally voted for a cautious 25-bp cut to 3.85%, preferring “predictability” over a bigger move. No heroics here – borrowing is still far more expensive than the sub-1% hey-day of 2021 (Reuters, 2025).
Inflation’s eased but hasn’t disappeared: headline CPI is tracking at 2.4% while underlying (trimmed-mean) inflation sits at 2.9% – both inside the 2-3% band, but only just (RBA, 2025).
2. What this means for your loan book
Latest RBA data puts small-business lending at 7.25% on existing balances and 6.89% for new deals. Every extra 25-bp costs roughly $2,600 a year on a $1m facility – cash you can’t reinvest (RBA, 2025).
Your 2025 Playbook
|
Move |
Why it matters now |
Quick wins |
|
Run weekly cash-flow war-games |
Expensive debt means less room for error. |
Build best/middle/worst-case models; stress-test interest cover at +1%. |
|
Price with purpose |
You can’t “absorb” inflation forever. |
Pivot to value-based or tiered pricing; anchor fees to outcomes, not hours. |
|
Zero-base the cost stack |
Hidden SaaS subs now come with an interest drag. |
Re-quote freight, energy, insurance; join buying collectives where possible. |
|
Plug the working-capital gap |
Overdrafts at 9-12% strangle growth. |
Use invoice finance – funds in 24h, linked to turnover, no real estate security (Nalinee, 2025). |
|
Tighten trade terms |
Slow payers chew margin when money’s costly. |
Shorten payment windows, add late-fee clauses, automate reminders, outsource collections. |
|
Sweat the ops |
Efficiency is the cheapest “funding” source. |
Automate admin, kill low-margin SKUs, optimise fulfilment touchpoints. |
|
Build your advisory bench |
Wrong structure = five-figure tax pain. |
Keep a sharp tax accountant, commercial lawyer and straight-talking coach on speed-dial. |
3. Funding tactics that still make sense
Term loans are fine for kit you’ll use for years, but they’re hopeless when wages are due Friday. Invoice finance unlocks up to 80% of an invoice’s value within a day, flexes with sales and leaves the family home off the line. Compare that to a 15% unsecured OD.
4. Operational tune-ups that add dollars today
-
Cull hobby lines – if a SKU doesn’t clear your new hurdle rate, bin it.
-
Lock in the A-team – wage pressure is real; overpay your stars before the market does.
-
Scenario-plan hard – model soft-landing, stagflation and rate-cut bonanza and know your levers for each.
5. The blunt truth
Waiting for the RBA to ride to the rescue is wishful thinking. Cheap money’s gone; the businesses that model ferociously, price confidently and fund smartly will eat the lunches of those still pining for 2021.
Need predictable cash-flow now?
Brunswick Invoice Finance turns your receivables into working capital without another mortgage. Chat to us about turning tomorrow’s invoices into today’s growth fuel – fast, flexible and no nonsense.
No fluff – just cash when rates are anything but.