This July sees one of the toughest starts to a new financial year in decades, with small business owners bearing the brunt of the impact. Scottish Pacific CEO Peter Langham says business owners need to take action to ensure their survival.
Langham says as business owners put together new contingency plans for the second half of 2020 to deal with COVID-19 related trading conditions, two issues should be non-negotiable as part of their plans – securing business finance and protecting cash flow.
“Business owners may find it harder to secure funding that they have relied on in the past, and the banks are already flagging that approvals may take longer due to COVID-19 demand,” Mr Langham said.
“Australia was last in recession three decades ago, so it will be the first time that many business owners have had to deal with recession conditions.
“This makes it crucial for business owners to understand that they may have the option of unlocking cash that is already there, in their existing business assets,” Langham said.
Think carefully about how to fund your business
An estimated 800,000 businesses are relying on JobKeeper payments, but the scheme is set to end in late September. With the cut-off date looming, it is especially important for business owners to think early about putting in place the right ongoing business funding option.
“It saves a lot of anxious moments if you have the right financing in place before you actually need it, rather than scrambling at the last minute and potentially selecting an option that will cost you more in the long run,” Langham said.
“Business owners should be looking for ways to maximise the value they’ve created in their business, and they might find these ‘hidden assets’ are a better option than seeking new loans or increased overdrafts.
“These ‘hidden assets’ could be accessed, for example, by turning unpaid invoices into funding, leveraging plant and equipment as security or seeking trade finance to boost purchasing power to pay overseas and domestic suppliers.
“Now may be a good time to take the family home out of your business finance facilities and replace it with business assets as security instead,” he said.
Scottish Pacific and the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) have jointly created an independent, free downloadable Business Funding Guide for SMEs and a more detailed version for SMEs’ accountants and other key advisers such as brokers to help small businesses understand the range of funding options and which options suit their circumstances.
Protect cash flow to help buffer business
The experts are saying that the pandemic has made the situation so changeable that its wise for businesses to prepare many different scenarios and move on the most promising one for the times.
“Having a cash flow buffer helps a business ride out tough times, and also allows business owners to move quickly if they see an opportunity,” Langham said.
“With tough trading conditions continuing for the foreseeable future many businesses are expecting an increase in late-paying customers, and others are concerned that they will not be able to afford to update essential equipment.
“Our customers are realising the growth potential in their businesses by unlocking the cash tied up in invoices or business assets, with invoice funding proving itself as a style of funding that grows in line with the business and adapts to changing needs, without risking the family home.
“Scottish Pacific can help in all situations, whether the business is growing or looking to establish itself.
“With funding secured against the business assets and growing in line with the sales, owners no longer need to wonder whether they can take on that extra work,” Langham said.