Many businesses and in particular small business, have been really struggling under the weight of COVID-19 and with the rollback of JobKeeper, things have just gotten tougher.
The Australian Small Business and Family Enterprise Ombudsman Kate Carnell is urging the Federal Government to establish a revenue-contingent loan scheme for small businesses, to provide them with the cash flow they need to survive the next 12 months.
With government support measures being withdrawn, banks continuing to subject small business borrowers to onerous credit assessment processes, rent relief ending and the impact of recent lockdowns and border closures, Ms Carnell says access to finance could mean the difference between life and death for many small businesses.
‘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 says.
‘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.
A revenue-contingent loan program
Ms Carnell is calling on the Federal Government to introduce a revenue-contingent loan program for small businesses, similar to HECS, requiring borrowers to repay when their turnover reaches a designated level.
The loan would be Government-funded and capped at a percentage of the small business’ annual revenue. Applicants would need 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 says.
‘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% 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’.
Recent stories, information and updates regarding COVID-19
New data from the Australian Bureau of Statistics Life shows life expectancy in Australia has decreased slightly for the second year in a row. An international team of researchers has found more evidence that COVID-19 came from animals in a Wuhan food market. The lab-leak theory that Covid-19 came from the Wuhan Institute of Virology – instead of a nearby wet market – was thrashed about in public recently, with the US Senate Homeland Security Committee holding a hearing into Covid-19. Eighteen schools in the Northern Rivers division of Richmond have received $25,000 each as part of the federal government’s School Upgrade Fund, Labor Member for Richmond Justine Elliot said last week. COVID-19 reversed earlier trends toward longer life expectancies. During the pandemic, life expectancies globally dropped by 1.6 years according to a new study published in the Lancet medical journal. Let’s not forget that Covid-19 is still a big issue in our community with 31,935 cases reported across Australia in the last week – an average of 4,562 cases per day. The Global Carbon Budget is about to be refreshed, giving the world a critical insight into how efforts to reduce greenhouse gas emissions are (or are not) progressing. Masks will no longer be mandatory on public transport from tomorrow, Wednesday 21 September. SW Police are urging festival-goers at this weekend’s music festival to celebrate in a safe and responsible manner, whilst also being aware of COVID-Safety measures. The Northern NSW Local Health District reports that to 4pm yesterday, Sunday May 22, there were 40 COVID-19 positive patients in hospital in Northern NSW, with one of these in ICU.
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