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A broker association has called for industry-specific government assistance to help support SMEs impacted by COVID-19 as stimulus measures wind back.
Speaking to The Adviser, the president of the Commercial and Asset Finance Brokers Association of Australia (CAFBA), Matthew Atkin, warned that small-to-medium enterprises (SME) in the tourism and hospitality sectors would continue to struggle “for quite some time” in the aftermath of the coronavirus pandemic.
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Indeed, these sectors have borne the brunt of the devastating economic impacts of the COVID-19 crisis due to border closures, social distancing measures and snap lockdowns (such as that currently in place in Melbourne).
While government has provided several stimulus measures to provide financial assistance for SMEs (such as JobKeeper, the Coronavirus SME Guarantee Scheme, cash flow boost etc), Mr Atkin said the industries hardest hit by the COVID-19 crisis would continue to struggle over the coming months as the measures are wound back.
“I’ll be interested to see how they come out in the next few months. Anything that’s travel-related is going to hurt for quite some time,” he said.
“There is a lot of talk about a K-shaped recovery, and I think this is going to be true. Industries such as tourism operators are likely to be impacted heavily when the current assistance packages are wound back. Other industries have already either bounced back or are on the road to recovery.
“As a result, I believe there is likely to be a rise in insolvency in some industries but not necessarily across the board.”
As such, Mr Atkin suggested that there might be cause for special assistance for the most affected sectors from the government.
“I think there should perhaps be some industry-specific assistance from the government for those industries that just can’t trade in the current environment,” Mr Atkin said.
“You might start to see some targeted things.”
Measures for arts and entertainment
There is already evidence of this, with the federal government launching its $90-million loan Show Starter Loan Scheme in December 2020, targeting arts and entertainment businesses adversely affected by the pandemic. It is designed to assist creative economy businesses access financing for new productions and events that could stimulate job creation and economic activity.
The scheme forms a part of the government’s $250 million COVID-19 Creative Economy Support Package, is backed by a 100 per cent government guarantee, and is being delivered through the $40-billion Coronavirus SME Guarantee Scheme.
Under the scheme, eligible creative economy businesses will be able to apply for loans of up to 50 per cent of the total budget for an activity (or up to $5 million, whichever is the lesser amount) to support the delivery of new arts and entertainment productions or events, with five-year loan terms.
Similarly, the HomeBuilder scheme was introduced to support the construction industry (albeit in a more indirect fashion) by creating demand from home buyers and home owners to build a new home or “substantially renovate” their existing property, in turn increasing employment in the construction sector.
SMEs buoyed by strong balance sheets
Commenting on the overall health of SMEs in the aftermath of the COVID-19 crisis, Mr Atkin said the balance sheets of many SMEs are stronger now than a year ago, which he has partly attributed to the federal government’s support mechanisms.
“The flow-on effect from those policies probably was that it gave consumers confidence, and it gave businesses more confidence to invest a little bit more than they otherwise would have,” Mr Atkin said.
“All those measures created a level of confidence and calmness so that people who owned businesses would make really considered, good decisions. It enabled them to keep staff on. When you roll that all together, then by definition insolvencies would decrease.”
Mr Atkin’s comments follow those by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell, who told attendees of the SME Broker Bootcamp that while insolvency figures had reduced significantly in 2020, businesses were being artificially propelled by the government stimulus measures.
Indeed, figures from the Australian Financial Security Authority (AFSA) have shown that personal insolvencies fell 54.4 per cent in the December 2020 quarter, with 2,406 new personal insolvencies recorded in Australia.
Meanwhile, bankruptcies fell by 53.0 per cent over the quarter, while personal insolvency agreements fell by 58.0 per cent.
Nevertheless, looking ahead, as the government begins to wind back the stimulus measures in the coming months, Mr Atkin said he expects the economy to perform “reasonably strongly” in 2021.
However, he warned that these expectations would hinge on there being no further large outbreaks of COVID-19 that could result in further lockdowns and restrictions, and the rollout of a vaccine over the next six to 12 months.
Mr Atkin advised brokers to ensure that their SME clients are aware of business incentives like the backing business investment – accelerated depreciation rules, where eligible businesses may be able to deduct the cost of new depreciating assets at an accelerated rate for the 2019-20 and 2020-21 income years when lodging their tax return.
“It is a fantastic program, and I think clients and brokers need to be aware of that and take advantage of that program,” Mr Atkin said.
[Related: Government launches cyber security scheme to help SMEs]
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