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The impact of the COVID-19 crisis has varied for different SME sectors, meaning brokers need to conduct targeted conversations with their SME clients to guide them through the post-COVID world, according to a lender.
As the Australian economy emerges from a recession triggered by the coronavirus pandemic and prepares for the year ahead, small-business confidence is also rising, meaning that many business owners may be considering growth strategies for their business.
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However, Prospa co-founder and chief revenue officer Beau Bertoli suggested that brokers who service small-to-medium enterprise (SME) clients should “bucket” them into two groups: those who have benefited from the COVID-19 crisis or are trading in the same conditions as they were prior to the onset of the pandemic, and those whose businesses and operating conditions have been negatively impacted.
“You need to communicate and talk to those two groups of customers quite differently,” Mr Bertoli said in an episode of The Adviser’s In Focus.
He noted that while online retail stores may have thrived during the COVID-19 crisis, hospitality businesses in central business districts have faced significant pressure, with revenue dwindling year-on-year.
However, suburban hospitality businesses in local communities might have thrived as more customers visit them as they work from home, Mr Bertoli pointed out.
“Really understand which bucket the customer fits in. Their requirement for capital could be quite different,” he said.
Businesses who are currently facing fair trading conditions or have benefited during this period and are witnessing growth may have pending investment decisions on the horizon, according to Mr Bertoli.
“Those investment decisions could be things like hiring more people, it could be restocking their business and their inventories and bringing their inventories up so they can take advantage of more growth next year.
“It could be looking at their equipment. During this crisis, business capex investment fell off a cliff. Businesses just pushed out replacing their equipment. That’s now changing.”
As confidence returns and businesses contemplate upgrading their equipment, Mr Bertoli suggested that finance brokers could ask their SME clients about their plans for upgrading and purchasing their equipment over the next 12 to 24 months.
Brokers could also ask businesses how they are managing their inventory, and what has changed in the way they provide their services this year, Mr Bertoli said.
“Nine times out of 10, you’ll find an opportunity there where some form of capital could be useful,” he said.
“It could be a term type product like asset finance or a term loan, or it could be a flexible product like a revolving line of credit where they can draw down on it as they need it.”
For SMEs doing it tough
For the second group of SME clients who may be facing hardship in their business due to the COVID-19 crisis, their path to recovery might still be six to 12 months away, but Mr Bertoli said brokers should not underestimate how quickly these businesses (such international tourism-based businesses) are trying to pivot to adapt to the changed conditions.
“As they transform their business, as they run local marketing campaigns in the Australian economy, all these kinds of things require money,” Mr Bertoli said.
“Even the businesses that have had a really tough time are finding ways to change and finding ways to try and drive more revenue into their business.”
Mr Bertoli advised that products that are flexible such as lines of credit could be appropriate for these sorts of businesses.
“Just enquire about what their plans are, how they’re thinking about the next 12 months, where they’re going to be spending money,” Mr Bertoli concluded.
To listen to the full In Focus episode with Prospa co-founder and chief revenue officer Beau Bertoli, click here:
[Related: In Focus: What’s driving SME credit?]
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