Even with the robust COVID-19 support measures introduced by banks, government and regulators, Australia’s small businesses have struggled to secure the finance they need to continue healthy operations, according to recently published data.
The August Sensis Business Index revealed that more than one in four businesses (26%) were knocked back while attempting to obtain finance over the past three months.
“Right now, the banks are taking a very conservative approach to funding businesses and property asset prices,” said Tarek Omar of financial services firm Royce Stone Capital.
“Unfortunately, we have a situation where at a time when businesses critically need capital, they are unable to get it through traditional sources of funding.
“Cash flow based businesses such as those in hospitality don't have any line of sight when their pre COVID-19 revenues will return to what was previously normal.”
Without being able to demonstrate debt serviceability due to their declined revenues, Omar believes these businesses will continue to struggle to secure finance.
Regional businesses were even worse off than those in the cities, with 37% of business loan applicants rejected for the former as compared to 25% for the latter.
The sector most negatively impacted across the board was transport and storage, with just 20% of business loan applications approved in the space.
While other sectors such as health and community services also struggled, with 45% of businesses being denied, others stood as notable exceptions.
Just 15% of businesses in construction and property were left disappointed while 77% reported having found success.
Over a third of those surveyed (36%) believe it has been more difficult to obtain finance since the onset of COVID-19, while 51% feel it’s been the same and 12% believing it has been easier.
However, even the businesses which have gotten hold of funding need to tread carefully in the months ahead, according to Omar.
“Virus economics combined with government intervention, presents very different challenges compared to when market forces work naturally,” he explained.
“Having an understanding of government policy regardless of one's political beliefs moving forward is key to understanding how things will unravel and how best to navigate the landscape.
“Business owners need to be resilient, to look at new ways of operating and above all plan for how they will grow post COVID-19.”
