A new study has revealed that one of the top priorities held among a majority of Australian SMEs is paying down their debt in the new year.
The latest SME Growth Index data, conducted by East & Partners on behalf of non-bank lender ScotPac, found that many Australian business owners are using the relative stability following the worst of the COVID-19 pandemic to restructure and pay down their debt to better suit their future operations.
However, the goal takes on a certain level of irony as many of the federal stimulus measures which helped prop up the national economy required SMEs to take on more debt, ScotPac CEO Jon Sutton noted.
“2021 is not a time to kick the can further down the road: it’s really crucial for business owners to find ways to unlock capital to ease cashflow issues that can be crippling even in good times let alone during a recession,” he said.
“2021 is the right time, hopefully with the worst of the business shutdowns behind us, for SME owners to make the tough decisions about their business and find better ways to fund their operations.”
Sutton also explained that previous Index data has shown a “very large proportion” of small businesses use easy access debt such as personal credit cards or their own funds to access working capital for their enterprises; as such, the CEO has encouraged business owners and their advisors to strategise about next steps sooner rather than later.
“Small businesses in 2021 will be either looking to take advantage of market opportunities, or scrambling to shore up cashflow once they come off programs such as JobKeeper, so having conversations as soon as possible about how to secure the right funding would be win-win for brokers and their clients,” he said.
The CEO added that brokers' support is additionally invaluable in light of the COVID-specific response options added to the research for this iteration of the Index, showing that two-thirds of SMEs remain worried about the lack of a clear recovery path from the events of the past year.
Further, nearly half (47%) communicated difficulty accessing government guaranteed loans during COVID-19 and a quarter (23%) voiced frustrated about online lenders charging high interest rates.
“Don’t wait until JobKeeper is off the table for you or your suppliers, get on the front foot with finding the right funding and make decisions before it’s forced on you,” Sutton concluded.
