Small business loans amid Australian lockdowns

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The world continues to face the COVID-19 pandemic, with some countries presenting more challenges than others. Australia in particular ranks among the most locked down countries and entrepreneurs around the world are paying close attention to the latest developments.

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Will Australian businesses be able to weather a new round of bottlenecks with no short-term end in sight? Will banks and financial institutions continue to expand Australia small business loans in economic uncertainty?

Just weeks after the new lockdown, we have information that should give the entrepreneurs concerned hope.

Australia’s lockdown creates problems for small businesses

Australia’s Canberra is the latest to enter a strict confinement. The lockdown of the capital means that 400,000 people are confined to their homes, except for essential reasons. Canberra joins other major economic hubs like Sydney and Melbourne which recently announced their own closures.

In fact, Melbourne is Australia’s second largest city and announced its sixth lockdown in early August. Many small businesses already struggling in Melbourne and the affected areas may decide to shut down for good.

Unfortunately, existing government support programs require small businesses to demonstrate their turnover is down 70% to receive financial assistance. As any entrepreneur knows, even a 10% drop in income is problematic. So companies that feel the pain with their revenues cut in half are left in the dark.

Chrissie Maus, small business advocate and managing director of Chapel Street Precinct, said small businesses on the iconic shopping street are “like walking zombies.” She also said there was no “compassion, support and care” from the government.

Even if a company is able to access support, it may prove to be insufficient. Companies that are optimistic about their future in the years to come clearly need financial support from outside the government.

Do Australians have easy access to small business loans?

Now more than ever, struggling small businesses backed by courageous entrepreneurs ready to weather any short-term turmoil are turning to financial institutions and hoping for a lifeline.

But how easy is it for Australian entrepreneurs to get a small business loan? Are Australian lenders even keen to lend money in this uncertain environment?

Taulia is a company based in the United States financial technology Provider of working capital management solutions to Australian businesses of all sizes. The company said in early August research report that Australian small businesses are struggling to obtain affordable financing.

Taulia found that small businesses often have to settle for interest rates that are more than 10% higher than what large businesses can borrow.

Yet on the other hand, another small business fintech lender, the Prospa Group, showed a more confident and bullish tone. In the company’s fourth fiscal quarter (ended June 2021) results update, Prospa reported some impressive indicators, including:

  • 51% increase in loan origination to A $ 182.1 million.
  • The highest quarterly creations ever.
  • Recurring and loyal customers accounted for half of all creations.

Commenting on the report, Prospa CEO Greg Moshal said:

“While we are all too aware of the challenges small businesses currently face in the Greater Sydney Metropolitan Area, Victoria and South Australia, the SME sector has generally been on a solid recovery path over the years. of the past financial year. A study carried out on our behalf by RFi Consulting in May 2021 shows that one in four SME entrepreneurs expects an increase in their FY21 turnover. This compares to just 7% who expect it to decrease for the period. ”

Prospa is required to update the investor community with data like this because it is a public company. Unfortunately, private businesses don’t face the same demands, so it’s impossible to know for sure whether Prospa’s optimism is shared by the Australian small business lending community.

Entrepreneurs are better prepared

More than a year after the start of the pandemic, motivated entrepreneurs are better equipped to cope with the fallout from 2020. Many companies have been successful in adopting an online model or introducing other changes necessary for their business. adapt to difficult times.

There is telltale data that clearly shows that small business operators are fighting. According to the Australian Banking Association, from July 8 to the first week of August, only 600 business loans across the country were on delay. This is a small fraction compared to the 225,000 Australian business loans that were carried over in the same period a year earlier.

CreditorWatch CEO Patrick Coghlan said:

“Over the past 12-18 months, companies have also learned a lot about how to prepare and plan for the future. There has been a big shift towards the Web, automation and digital… businesses are much lighter. “

To be fair, this statement cannot apply to all businesses. Some entrepreneurs who default on their specific product will find it easier to adapt. Many others, especially those who survive on tourism and events, cannot adapt at all.

Fortunately, Australian small business lenders are showing a willingness to lend capital so that entrepreneurs have a chance to operate in the years and decades to come.

Conclusion: Entrepreneurs will find a way to thrive

Entrepreneurs are among the most resilient groups of people in the world and will always find a way to thrive. There is no doubt that the pandemic has created a scenario that little or no business leaders could never have imagined. But more than a year after the onset of the crisis, the business world has learned to adapt and change.

Fortunately, small business loans in Australia remain accessible to those who are willing to fight. They are the ones who will overcome the short-term challenges and become the business leaders of tomorrow.

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