Australian Small Business and Family Enterprise Ombudsman Kate Carnell believes the next 12 months will be critical for businesses through the combination of government support measures being withdrawn, banks continuing to subject small business borrowers to onerous credit assessment processes, rent relief ending, and uncertainty surrounding snap lockdowns and border closures.
“Unfortunately, it’s a perfect storm scenario — especially for those small businesses that haven’t been able to fully recover from the COVID crisis,” Ms Carnell said.
“Access to credit will be critical to keeping those otherwise viable small businesses afloat, particularly over the coming months as support measures are phased out and the bills start flowing in again.”
To simplify access to credit, Ms Carnell is calling for the government to introduce a HECS-like loan program for small businesses where borrowers start repaying when their turnover reaches a designated level.
Ms Carnell envisages that the loan be government-funded, and capped at a percentage of the small business’s annual revenue, with potential applicants needing to satisfy a viability test conducted by an accredited adviser to be eligible.
“Sudden lockdowns and border closures have heavily impacted small businesses in recent weeks — it’s no wonder they are scared to take on additional bank debt given conditions can deteriorate so rapidly,” Ms Carnell said.
“Even in the best of times, small businesses have struggled to secure finance. Taking into account the enormous challenges they are now facing, the fallout of insufficient working capital could be devastating, not only for small-business owners and their staff, but for the broader economy.
“The latest ASIC data shows external administrator appointments were up by 23 per cent in December 2020 and economists are predicting the number of businesses entering voluntary administration to rise this year.
“A revenue-contingent loan scheme would give small businesses the confidence they need to seek funding, so they can survive and employ again. It’s essential to Australia’s economic recovery.”