The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, is calling on the federal government to set up a revenue-contingent loan scheme for small businesses to help them through the next 12 months.
The push comes as various government support measures, including JobKeeper, begin to be withdrawn and amid continued uncertainty around border closures, lockdowns and the coronavirus in general.
Carnell says access to finance would mean the difference between life and death for many small businesses.
The printing industry has increasingly found it difficult to apply for loans from banks with many industry insiders saying the ability for print businesses to gain credit will be made even more difficult after Ovato’s restructure deal.
“Unfortunately it’s a perfect storm scenario – especially for those small businesses that haven’t been able to fully recover from the COVID crisis,” 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.”
Revenue-contingent loans
Carnell is pushing for the introduction of revenue-contingent loans, particularly over the coming months, which would operate similar to HECS system in that businesses would pay back the money once their turnover hits a designated level.
Under the plan, the loans would be government-funded and capped at a percentage of the small business’ annual revenue.
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,” Carnell says.
“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.”
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