Small businesses have borne the brunt of the coronavirus crisis. At the height of the pandemic they were twice as likely to record a substantial decline in revenue compared to large businesses, according to a survey by the Australian Bureau of Statistics.

Even as conditions improve, small businesses remain disproportionally affected. That’s because they’re more likely to sit within the sectors that have been most impacted by COVID-19 restrictions, such as cafes, restaurants, tourism and arts.

New data by the ABS found 42% of small businesses had less than three months of cash on hand available during February, compared to 24% of large businesses.

With the government’s wage subsidy, JobKeeper due to expire at the end of March, Small Business Ombudsman Kate Carnell has warned access to finance could mean the difference between life and death for many small businesses.

“Access to credit will be critical to keeping small businesses afloat as various government support measures are withdrawn, rent relief ends and those overheads start to pile up,” she said.

What support is available?

Whether you’re a business owner needing some extra cashflow to get you through the months ahead, or you’ve been holding off from expanding until the outlook improved, there are plenty of support measures out there for small and medium sized businesses.

Last year, the government rolled out a range of measures to make it easier for businesses to access loans during the pandemic, including a loan guarantee scheme for small and medium enterprises (SMEs), and temporary exemptions from responsible lending obligations for lenders providing credit to small business customers. This exemption will be made permanent in March as part of a broader package of reforms to Australia’s lending laws.

But despite government support and record low interest rates, business lending remains subdued. So, why aren’t businesses borrowing?

Uncertainty remains

Recent economic data has painted a positive picture for the economy – an estimated 93% of the jobs lost during the pandemic have now returned and consumers are feeling more confident than they have in a decade. But after so much uncertainty, we may need the vaccine to be more widely rolled out before businesses get the confidence to take on new debt to invest and grow.

Stimulus has helped boost cash reserves

In a recent economic update, the RBA said record levels of government stimulus and temporary loan deferrals have allowed businesses to build up liquidity buffers, likely reducing the need for new loans.

According to the Australian Banking Association, almost 200,000 SMEs put their business loans on hold at the peak of the pandemic. Most have now resumed repayments.

Those who need it can’t get it

At the same time, getting access to finance continues to be a challenge for businesses in the hardest hit sectors.

In its latest Statement of Monetary Policy, the RBA noted “the availability of credit to businesses tightened in 2020, mostly for those business that have been more affected by the pandemic.”

“Some banks continue to be cautious about lending to particular sectors – such as tourism, retail and commercial property – and to customers that are new to the bank,” it added.

Speak to your Smartline Adviser

Even in the best of times, small businesses have struggled to secure loans due to their unique and diverse finance requirements.

That’s where a Smartline adviser can help. They can compare finance options from Australia’s top commercial lenders, including smaller banks and non-bank lenders to find the most suitable loan for your situation.

Talk to a Smartline Adviser today.

Calls for targeted support

With less than two sitting weeks left of parliament before the end of JobKeeper, the government is reportedly looking into targeted support for businesses in the hardest-hit sectors.

Business groups have been campaigning for the government to consider a HECS-style loan scheme for small businesses, which would see them only start to make repayments once turnover returns to a designated level.

“Sudden lockdowns and border closures have hit small businesses hard in recent weeks – it’s no wonder they are reluctant to take on additional bank debt when conditions can deteriorate without warning,” said Small Business Ombudsman, Kate Carnell.

“A revenue contingent loan scheme would give small businesses the confidence they need to seek funding, so they can survive and employ again,” she added.

Treasury officials have met to discuss the merits of a revenue contingent loan scheme, according to media reports, however the government has not commented on whether it’s considering the proposal.

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