Brokers urged to help SMEs through COVID-19

The government also said it will invest up to $15 billion to enable smaller lenders to continue lending to consumers and businesses, while the RBA is launching a $90-billion term funding facility (TFF) for ADIs that will also support lending to small and medium enterprises.

The stimulus package was targeted specifically at Australia’s small-business sector, which is said to make up nine in 10 of all Australian businesses.

Industrial Relations Minister Christian Porter stated that the new stimulus measures will be put in place as a “safety net” for those in need of assistance, including businesses, business sectors or individuals, including those who have lost employment.

“So, you know it is extraordinary, these are unprecedented times in many ways, but not issues that we’re unprepared for,” Mr Porter said.

Call for brokers to take action

With this in mind, SME lender OnDeck Australia and fintech Prospa have called on brokers to educate themselves on what the new stimulus package has to offer, and contact SME clients to help them navigate and take advantage of the benefits, particularly those with stricter time limits.

Prospa CEO Greg Moshal commented: “Brokers have been important champions of small business in Australia. They play a vital role in growing awareness of non-bank lenders and improving small business access to funding. They help us reach far more small business owners than we ever could direct. 

“Small businesses are facing significant cash flow pressures in this difficult trading period and things are constantly changing. As trusted advisers, brokers can support their small business clients and help them navigate the different funding options available during this tough time. This might be funding through non-bank lenders like Prospa or access to the government’s $17 billion stimulus package announced earlier this month or the more recent funding facilities announced by the Reserve Bank. Small business owners need our industry’s help right now so let’s do what we can, together.”

In particular, SME lenders have noted one measure in the package – an uplift in the instant asset write-off from $30,000 to $150,000 for businesses with an annual turnover of up to $500 million – which is only in place until 30 June 2020, giving businesses just three months to act on this tax break.

According to OnDeck Australia, the new threshold for the instant asset write-off could save SMEs up to $41,250 in tax for the current financial year, which could significantly improve cash flow.

In addition to the instant asset write-off provisions, the federal government’s stimulus package also includes:

• SMEs with turnover below $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance. This will extend to 30 June 2021.
• Over 700,000 SMEs will receive a payment between $2,000 and $25,000 to help pay wages or hire staff.
• Small businesses with apprentices will receive wage subsidies of up to $21,000. 

The package also includes $1 billion to support sectors, regions and communities that have been heavily impacted by the economic fallout of the coronavirus, including tourism, agriculture and education. 

State governments have also released their own initiatives in order to assist businesses through economic hardship caused by COVID-19.

OnDeck Australia CEO Cameron Poolman welcomed the stimulus package and stated that the health of the small-business sector “is critical to the wellbeing of the Australian economy”.

Mr Poolman also noted the importance of brokers remaining in contact with their SME clients, as the virus continues to affect both brokers and businesses.

“In addition, brokers need to remind all their clients that they are still very much open for business despite the social distancing currently being recommended as a precaution against COVID-19. 

“Brokers can ‘meet’ electronically with clients via Skype, Google Hangouts, email or even phone,” he said.

He made this point, in recognition of the fact that the government’s stimulus measures are temporary, and SME clients will need to act quickly to take advantage of them.

“Plenty of small businesses are likely to take advantage of the initiatives, especially the expanded instant asset write-off, but it is important for brokers to have conversations with their SME clients around these measures,” Mr Poolman said.

“Small-business owners need to be aware that the stimulus measures are temporary. 

“In particular, the enlarged instant asset write-off only applies until 30 June 2020, giving SMEs just three months to take advantage of this tax break,” he said.

“The instant asset write-off is only available on new or secondhand assets that are installed by 30 June 2020, so time is of the essence. 

“It is critical for SME owners to act fast to secure finance to purchase the asset and have it in situ before 30 June to be eligible for the instant write-off,” Mr Poolman said.

SMEs need plans in place to protect their cashflow: AIF

A similar sentiment was shared by the managing director of debtor finance provider Australian Invoice Finance, Greg Charlwood, who stated that SME cash flow needs to be protected in this uncertain period.

“Just as SMEs should have plans to safeguard the health of their employees, it’s critical that they also have plans in place to protect their cash flow and their business,” Mr Charlwood said. 

The COVID-19 outbreak has caused changes in the behaviour of many Australians, which can all lead to cash flow pressure for SMEs to “change daily” and could also see some small businesses struggle to secure finance during these uncertain times. 

“Small-business owners need to think carefully about alternative potential methods of managing their cash flow, financing their day-to-day activities, and ensure they’re able to survive in a very different business environment,” Mr Charlwood said. 

He added that the pool of working capital is “the most important asset” SMEs have, stating: “It’s important to have a strategy for accessing additional capital if [they] need it, such as a line of credit, especially as there is a chance the economy could move into a recession. 

“Alternative sources of credit such as invoice finance can take the pressure off when cash flow is tight, and help cover regular expenses such as wages, utilities bills and tax obligations.” 

Given that nearly two-thirds of all small businesses are sole traders, the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, recently issued a plea to government for additional support for this segment of the market.

[Related: SMEs receive multibillion-dollar stimulus injection]