ABS data reveals extent of COVID-19 financial hit to Australian businesses

We knew it already, but now it’s official. The significant impact COVID-19 is having on Australian businesses has been brought home in new data released by the Australian Bureau of Statistics (ABS). 

Released on Tuesday, the figures from the ABS reveal that 66% of Australian businesses are already reporting either lower turnover or cash flow as a result of the fallout from coronavirus.

Furthermore, 47% of businesses have been required to make changes to their normal workforce arrangements including altering working hours for their staff, facilitating working from home setups or placing staff on leave.

RELATED: Guide to Australia's coronavirus financial support for small businesses

“The Covid 19 situation is unprecedented and is challenging all aspects of the Australian Economy,” said David Rose, Chief Financial Officer at Scottish Pacific. 

“For most, the challenge will be the same. Finding a way to manage operational cash flows and working capital in a period of falling revenues, fixed costs and slower payments from customers.”   

So with a lower amount of turnover and reduced cash flow, where can Australian businesses turn in order to access financial relief or additional finance during this difficult period? 

“There are many avenues of support,” said Rose. “Firstly, the various federal and state government stimulus packages should help provide some relief. Next, they [businesses] should talk to their Banks about Emergency Loans. Other Lenders may also offer assistance through this period.” 

“At ScotPac, we are supporting our existing clients and have also pulled together a COVID-19 Business Hub offering advice and regular updates on the ever changing situation. Alongside this our appetite to help and fund SMEs remains as strong as ever.”

Here’s a quick rundown of the options that may be available to businesses depending on their situations. 

What kind of government or bank support is available? 

One of the major strategies employed by both Federal and State Governments has been to boost cash flow for businesses by way of financial support. At the time of writing, the Federal Government has announced two multi-billion dollar stimulus packages which include: 

• - Tax-free payments for eligible small and medium-sized businesses between $20,000 and $100,000

• - An apprentice wage assistance subsidy capped at $7,000 each quarter

• - An increase in the instant asset write-off initiative from $30,000 to $150,000 for eligible businesses

• - A 50% government guarantee on new business loans taken out under the Coronavirus Small to Medium Enterprises (SME) Guarantee Scheme

Support from major and minor banks has also been made available for business customers affected by COVID-19.

In addition to payment deferrals on existing business loans, credit cards and merchant terminals, eligible businesses with a turnover of less than $50 million may be able to access new, unsecured business loans of up to $250,000. 

These loans will have no establishment or monthly account fees and they’ll be available with a six month repayment deferral option.

What if my business hasn’t been affected, but I still need some extra finance?

While the overwhelming trend unveiled in the recent ABS data release revealed a severe financial hit, 11% of businesses did report an increase in demand for their products while 4% actually recorded an increase in turnover or cash flow. 

If your business is lucky enough to be part of the cohort financially unaffected by the measures taken to combat the COVID-19 outbreak, you’ll still be able to access finance from banks and other lenders by way of a business loan. 

And the good news is that many business loan rates have actually fallen in the last month following two separate cuts to the official cash rate by the Reserve Bank in March. 

According to figures from the Mozo database, the average residentially secured, variable rate business loan has dropped by 40 basis points since the start of the year, with the average rate as of April 1 sitting at just 4.65%. 

However, with an average rate of 5.37%, it still remains dearer to take out a loan with one of the four major banks (ANZ, Commonwealth Bank, NAB and Westpac). 

This compares to an average rate of 4.23% currently on offer by challenger banks such as Heritage Bank, IMB Bank and Suncorp among others. 

RELATED: Australia’s biggest insurance providers offer deferred payments to coronavirus impacted small businesses

For more information about the financial impact coronavirus is having on Australian individuals and businesses, check out our wrap article for a comprehensive list of related news stories and useful information.