Alternative Lending and The Government Support
As the ripple effects of the coronavirus COVID-19 outbreak spread wider, the authorities continue to announce measures to try and reduce the potential effects.
The Reserve Bank has pledged to do “whatever it takes” to protect businesses and households, injecting significant liquidity into the economy with a further interest rate cut, and announcing a package of initiatives to support the provision of credit to small and medium-sized businesses (SMEs) through the trading banks.
The Federal Government has also announced a series of measures to support business. These include temporary cashflow support and relief for financially distressed businesses, accelerated depreciation deductions, an increase in the instant asset write-off threshold, special financial assistance for industries and regions severely affected by the economic impacts of the virus, and relief from some tax obligations. State governments have also announced various measures including waivers of payroll tax and fees and charges.
All of these measures will provide some support to SMEs. However, if the coronavirus outbreak is not contained successfully and business conditions continue to deteriorate, business owners will need to focus even more on ensuring they have sufficient working finance to keep their business going and survive in a very different environment.
Sluggish cashflow by slow-paying customers is a chronic problem for many small businesses – a recent enquiry found that Australian late payment times were among the worst in the world, with invoices paid on average 26.4 days late.
The pool of working capital is the lifeblood of a small business, and it’s important to have a strategy for accessing additional capital, especially in these turbulent times.
Support from traditional lenders may become harder to get if the economy weakens further. Even before the onset of the coronavirus, many SMEs were experiencing challenges with getting finance, particularly without providing property as security. The regulator for the banking sector, the Australian Prudential Regulation Authority, has been tightening loan serviceability rules, forcing the banks to apply tougher tests of borrowers’ income and expenses. Together with stricter checks on loan applications, this has already made access to credit more difficult for SMEs.
There are alternatives for small businesses to traditional bank lending. One is invoice finance, which is specifically designed to turn unpaid invoices into cash to pay supplier accounts and other operating expenses. Invoice financing can release the funds tied up in a business’ unpaid invoices, involving a lender who agrees to advance money against outstanding debtor balances.
Australian Invoice Finance lends up to 85% of unpaid business invoices and offers fast, same-day approval. This can help relieve pressure when cashflow is tight, giving small business owners greater peace of mind about their ability to cover regular expenses such as rent, wages, utilities bills, and other outgoings.
Find out more about how invoice finance can help your business:
Click here to contact an AIF invoice finance expert who can help your business with turnaround finance.