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The federal government’s expansion of the SME loan scheme announced on Thursday focuses too heavily on short-term survival, says CPA Australia.
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SME loan scheme expansion only addresses symptoms: CPA Australia
12 March 2021
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9 minute read
The professional accounting body is calling for subsidised business advice and disaster support initiatives to be included in the federal budget, after the Morrison government announced the expansion of its SME loan scheme.
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“Professional advice is needed to help businesses move from survival to recovery,” said Dr Jane Rennie, general manager of external affairs at CPA Australia. “Without advice, providing loans is like treating the symptoms without addressing the underlying condition.”
While supportive of the expanded loan scheme, Dr Rennie is concerned that it doesn’t lay a foundation for SMEs to recover and prosper under post-pandemic trading conditions.
“Like HECS loans for university students, this scheme allows the government to lend money to struggling businesses and recoup at a future point in time,” Dr Rennie said.
“However, whereas HECS is designed to support students while they learn skills to succeed in their careers, there’s no longer-term objective here.”
She believes the government should act on a recommendation put forward last year by the accounting, bookkeeping and small business bodies for a professional advice subsidy for small businesses.
The subsidy will see small businesses with up to $10 million in annual turnover eligible to obtain a subsidy valued up to $5,000 to access a tailored 15-month plan from an accredited professional on the next steps in their business recovery.
Dr Rennie has also urged the government to direct the banks to administer the expanded loan scheme flexibly, arguing that a rigid or burdensome application process would see businesses missing out.
The expansion, which will be available from 1 April, will see the limit of eligible loans rise from $1 million to $5 million under the scheme, as well as a cost split shift which will see the government guarantee a higher portion of the loan.
Borrowers will also be offered a repayment holiday on both principal and interest for up to 24 months, with loan terms increased from five years to 10 years.
Adding to its calls for longer-term vision, CPA Australia has urged the Morrison government to consider this as a case study for considering a standardised, targeted disaster support for businesses, another recommendation made in its federal budget submission.
“It is reasonably foreseeable that Australia will experience other disasters, including fire and flood,” Dr Rennie said. “When disasters occur, small businesses are often among the hardest hit. They need rapid assistance to help them to recover and survive.
“Delays in receiving assistance make it harder for affected businesses to recover from natural disasters. Having a predetermined model of financial support would reduce the economic impact of these events.”
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