As 2020 continues to be a financially tough year for small businesses, searching for ways to improve cashflow has become nothing short of essential. While business loans are a popular option, there may be a better solution for you if your struggle is with slow-paying debtors: invoice finance.
As job losses and pay cuts become the new norm for Australians, the question of how to earn a sustainable income has never been more pertinent. But what are your options beyond relying on government stimulus or payday loans which charge exorbitantly high fees? Global microfinance group Grameen has stepped in to offer low-income Aussies another way forward: setting up your own small business. Microfinance refers to small amounts of working capital that are provided to borrowers, typically excluded by mainstream lenders. These loans are backed by social collateral, which means each group of borrowers is collectively responsible for making sure their members meet their repayments.Grameen Australia’s chief executive officer, Adam Mooney says Grameen has a legacy of helping countries and communities out of crisis and its expansion to Australia in the coming months will aim to do just that. “We’re seeing Jobkeeper and Jobseeker being tapered off, so we want to be there at the right time in the right place to be able to provide the incentives to work but also the opportunity to work for many millions of people,” he says. While Grameen began in Bangladesh in the 1970s, its success in reaching 130,000 women in the US over the past decade has proven that its microfinance model can also be applied to “so-called developed countries”. The idea behind Grameen’s model is that it acts as a springboard for entrepreneurs to build up their business and become self-sustaining.“We want to be an enabling financial actor rather than a permanent fixture,” Mooney says.“The ideal scenario for each business is that it generates sufficient return, that it can grow itself and doesn’t need to continually come back for additional loans.”Mooney says the model especially complements Australia’s migrant and Aboriginal and Torres Strait Islander communities who “have got great skills and an aspiration but haven’t had that sort of investment capability to be able to start their own businesses.” For example, Grameen’s group formation structure lends itself well to the principles of collective wealth and collective identity that are culturally familiar to Indigenous people.
As small businesses grapple with the uncertainty of operating amid COVID-19, new research shows cashflow remains the biggest barrier to recovery. For 1 in 3 small business owners, cashflow sits top of mind as their primary worry, according to figures released by business lender Finstro this week.This is based on surveys with 1,200 Aussie small businesses in July, just before Victoria’s second pandemic wave worsened. Finstro’s chief product officer, Tom Whitworth said these concerns around cashflow reflect the “payments crunch” that many small to medium-sized enterprises (SMEs) face right now. That is, there’s a real struggle to balance slow-paying customers with suppliers requesting faster payment times. “Suppliers, who are rightly concerned about securing payments in this challenging environment are increasingly demanding shorter trade terms and often cash on delivery,” Whitworth said. “This makes it difficult for small businesses who are looking to order supplies and reinvigorate their businesses after a period of significantly reduced trade or shutdown.”
In the business world, not everyone has the luxury to wait for extra finance. Luckily if you need that cashflow boost ASAP, whether to purchase stock or pay your suppliers, Commonwealth Bank may have a solution. This week, the big bank launched a new online platform that promises to give its customers access to business loans in near real time. With BizExpress Online, eligible CommBank small business customers can apply for loans of up to $50,000, via their Netbank or the CommBank app. Once an automated lending decision has been made, funds will arrive in their account in as little as 20 minutes. According to CommBank’s business banking group executive, Mike Vacy-Lyle, BizExpress Online builds on an earlier product that was introduced to speed up the lending process.“When we launched ‘BizExpress’, the aim was to provide a simpler and faster lending experience for our small business customers, with same day decisions and funding within a week,” he said. “Our latest investment in the new digital version makes it even easier and quicker for our customers to get the financial support they need.”Right now, BizExpress Online is only available with business lending under the government’s SME Loan Guarantee Scheme. Under the first phase of this scheme, 50% of all new three-year unsecured business loans of up to $250,000 issued by participating lenders until 30 September 2020 will be guaranteed.“Small businesses need quick access to cash flow to keep them going through these tougher times - and BizExpress Online aims to provide them with this,” Vacy-Lyle said. This funding also comes with waived fees over the life of the loan and deferred repayments for the first six months.CommBank expects BizExpress Online will be expanded to other non-scheme loans and products in the coming months.
As Victoria enters its second lockdown and new community transmission cases are recorded daily in NSW, the battle against COVID-19 is far from over. That’s why for small businesses across Australia still fighting for survival, getting their hands on the right financial support and guidance has never been more essential. So if you’re pondering where to look for information and assistance, we’ve made your search a little easier. Below we’ve compiled a list of Aussie-based initiatives and resources that have popped up to help your business get back on its feet.
2020 has been a tough year for many Aussie businesses. Three months since COVID-19 was first declared a pandemic, 47% were still reporting falls in revenue, according to Australian Bureau of Statistics (ABS) data released last month. But as parts of Australia begin to reopen and navigate a COVID-safe environment, the next big question is this: how can small businesses ensure cashflow issues don’t stop them from bouncing back with full force? For some, the answer may be the government’s Coronavirus SME Loan Guarantee Scheme. Under the first phase of this scheme, set to end 30 September 2020, the government is guaranteeing half of all three-year unsecured business loans of up to $250,000 issued by participating lenders. Under the second phase, running between 1 October 2020 and 30 June 2021, small to medium-sized enterprises (SMEs) can access even larger loans of up to $1 million and repay them over a longer period of five years. Prospa is one of the scheme’s 41 participants, alongside other non-bank lenders including GetCapital, OnDeck Capital and Spotcap. And it’s catering for the scheme and the tough climate businesses face right now with two new products: the Back to Business loan and the Back to Business Line of Credit. (Note: from 30 September onwards, these products are no longer be available.)With both products, approved businesses can receive funds of up to $250,000 in as short as 24 hours, and they also won’t need to worry about making any loan repayments for six months. Prospa’s co-founder and chief revenue officer, Beau Bertoli says the focus of Back to Business is to help small businesses not just survive, but thrive for the rest of 2020. “Of course there are a lot of viable businesses across the country who were hit hard by restrictions and now need cash flow support, but many are now starting to get back to business and plan for the future,” he says. “Our funding has helped these small businesses make upgrades to meet new sanitation requirements, revamp their websites and introduce online services, and even launch digital marketing campaigns.”“There are also businesses in essential services or particular sectors experiencing demand who want to seize growth opportunities while they can,” he adds. “For example, with more Australians gardening and renovating, we’ve had fertiliser and tiling businesses with months of work lined up come to us for funds for extra stock and supplies.”
While Aussie businesses are making small strides towards recovery, new data reveals many continue to struggle with overdue debt. Figures from digital credit agency CreditorWatch released this week show that fewer businesses defaulted on credit last month - July’s default figure was 13% lower than in June. July also saw companies take a shorter time to repay any money owed, with an average 8% decline in payment times recorded across the board. But CreditorWatch’s chief executive officer, Patrick Coghlan said these signs of improvement are modest at best. For one, payment times were still a staggering 224% higher last month than in July 2019.
Westpac announced today that thousands of Australian businesses have not yet taken advantage of Merchant Choice Routing (MCR), and it will be taking a proactive role in helping merchants activate the service.Over the coming months, Westpac will reach out to merchant customers who stand to benefit from MCR, and unless they opt against it, will switch them over.Westpac chief executive business division, Guil Lima estimates that around 37,000 small businesses will be better off using the service.“Westpac’s decision today will help merchant customers with Westpac owned terminals activate pricing that’s best for them, giving them one less thing to worry about at an already very challenging time,” he said.
As many small businesses struggle to find their footing in a COVID-safe economy, the federal government has stepped in with another lifeline: an expansion of its SME Loan Guarantee Scheme.Under the existing scheme, the government guarantees 50% of business loans issued by participating lenders to small to medium-sized enterprises (SMEs). This guarantee initially covered three-year unsecured loans of up to $250,000 and was set to end on 30 September 2020. But the latest move means SMEs can soon access much larger loans of up to $1 million via the scheme and repay them over a longer period of five years. This second phase will run from 1 October 2020 until 30 June 2021. In other words, it’s due to start a day after a number of government stimulus programs (including the cash flow boost and apprentice wage assistance) expires.Phase two will also include secured loans (except if the collateral is commercial or residential property), and apply to a broader range of funding purposes beyond working capital.Treasurer Josh Frydenberg said the expansion reflects a shift in the government’s focus from aiding businesses’ short-term survival to supporting their investment in the longer run as they emerge out of COVID-induced ‘hibernation’.It comes after recent research found over a quarter of SMEs see lack of available funding as their biggest barrier to innovating and growing for the rest of 2020.A total of 41 lenders are currently participating in the scheme, including the big four banks (ANZ, Commonwealth Bank, NAB, Westpac) as well as non-bank lenders such as GetCapital, OnDeck, Prospa and Spotcap. So far, uptake has been lower than expected, with 15,600 businesses getting their hands on loans worth $1.5 billion, compared to the planned $40 billion. But CommBank’s chief executive, Matt Comyn said the expanded scheme will play an important role in small business recovery in the months ahead.“It is clear from the challenges that we are currently facing in Victoria that the recovery will not be as smooth or quick as first thought, which is why it is essential we come up with creative solutions that offer small businesses in particular different ways to play their part in helping the country and Australians get back on their feet,” he said. “[The] lifting of the amount available to $1 million and the loan extension to five years will allow SMEs … to make the investments needed to get people back to work, create new jobs and lift confidence across the economy.” NAB’s chief executive, Ross McEwan also welcomed the expansion. He said the changes will make the scheme “available to more businesses, for longer, to help them rebuild - and support Australia’s recovery.” Looking for extra finance to pay your staff or buy new equipment? Get started with a few deals below, or jump over to our business loans comparison table for even more options.