JobKeeper ends: Where to next for small business finance?

Woman small business owner shaking hands

JobKeeper and other government support such as the NSW commercial lease package have officially ended. For many small businesses, a big question now is how they'll be able to manage dips in cashflow as a result of withdrawn financial relief. 

According to recent research from Scotpac, when it comes to plans for recovery and growth for the rest of 2021, 65% of small to medium enterprises (SMEs) want to restructure their business. That includes looking for other avenues of funding.

Among those surveyed, 20% SMEs said they will need to cut costs to balance out the loss of stimulus funds. Nearly 20% are looking to make arrangements with the Australian Taxation Office, while about 16% plan to apply for a business loan

Unfortunately, another 25% of respondents said they have no strategy to get back on track. There are also more SMEs than last year who said they may have to shut down or sell their business if the market doesn't significantly improve - 34%, up from 31% in 2020. 

These figures were based on a national poll with 1,253 small businesses, conducted as part of ScotPac’s biannual SME Growth Index

Scotpac’s chief executive, Jon Sutton said that while there are a few “green shoots” indicating that the small business sector has withstood the worst of the pandemic, “the recovery is uneven and varies significantly by state, region and industry”. 

“Many businesses are forecasting growth, but many are not out of the woods yet,” he said. 

On the one hand, according to ScotPac's survey, 44% of SMEs feel more confident about running their business compared to pre-COVID, and about 55% have expressed plans to invest in growth over the next six months - up 3% since late last year. Scotpac’s SME revenue growth forecast is also up eight points for the first half of 2021. 

On the other hand however, Sutton said a lot of small businesses continue to do it tough. 

“There are positives, but we have to be realistic about what lies ahead. We still have half of the businesses polled this round, saying they are not yet ready to invest back into their business,” he said. 

Cashflow tips after JobKeeper 

So with stimulus ceasing, what are some practical steps small businesses can take to maintain their cashflow? Here are a few tips to get you started. 

  • Plan ahead: With two major business expenses - staff and rent - no longer supported by government measures from April onwards, now is a crucial time to review your cashflow. Do the maths on how much money will realistically need to flow in and out of your business over the next six months to help you stay afloat. Then look for ways to cut costs down to your new target. That might mean negotiating pricing with your suppliers, automating time-consuming tasks with software, or eliminating any spending that don’t contribute to your business goal. 
  • Consult a professional: Having an accountant by your side can be invaluable during this time, as they can assist you with your business budget, identify potential areas of growth and get you tax ready. Make sure the accountant you pick has the right certification in Australia - CPA (Certified Practising Accountants), CA (Chartered Accountants) or NIA (National Institute of Accountants) - and experience in the relevant industry. 
  • Consider a business loan: Finally, if you’re in the position to service a loan, there are many types of business finance that can free up your working capital and boost your cashflow. A line of credit might be a good fit if your cashflow is more unpredictable, as you can draw down up to a limit and only pay interest on the amount you access. But a term loan might suit you better on known costs, say, staff retention and inventory purchases, where you’ll need to calculate exactly how much funding you need upfront. The good news is accessing the latter type of finance should be easier thanks to the government’s renewed SME Loan Guarantee Scheme where it’s guaranteeing 80% of loans issued by eligible lenders. This scheme covers loans of up to $5 million over 10 years, with a 24-month repayment holiday also included. 

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