JobKeeper is due for a big shake-up next month, which means if you’ve been relying on it to get your business through these rocky times, you need to start planning ahead now.
With the small business ombudsman and many economists concerned about an "insolvency tsunami" hitting small businesses, it’s critical that you start thinking about your ongoing funding plans now to avoid being swept up in the tide.
JobKeeper support is set to end for many businesses on September 27, while it will continue for other eligible businesses under a reduced amount until March 28.
So with that in mind, you may want to start assessing your business’s ability to make loan repayments, pay staff without JobKeeper support, take care of ATO debts, as well as any other financial obligations.
So, what are the big 3 questions?
Businesses that have been drawing on JobKeeper should start asking the below three questions, says Wayne Smith, Group Executive of SME lender Scottish Pacific.
1. What support will I lose, and has my business got the cash available to replace it?
2. What payments will I have to make from October or March that I’m not making now?
3. Do I have any pressing creditors ready and able to take action against me once they are able to?
Why these questions are so important
The unfortunate fact is that over the coming months many businesses will have a funding gap and have to face some very tough decisions.
“Your answers to (the above) questions will guide whether you seek extra funding or make a tough call on your business,” Mr Smith says.
“You don’t want the business to accumulate debt if it’s not going to be viable.”
Mr Smith says businesses can consider seeking rent reductions, JobKeeper, government grants, and ATO deferments.
“These initiatives have helped many businesses hibernate or trade through the tough times. However it’s important to consider how this will pan out when commercial evictions for non-payment of rent return, and creditors are able to present winding up petitions,” Mr Smith adds.
Financing options you may consider
It’s important to note that the federal government’s Coronavirus SME Guarantee Scheme is being extended, with the initiative allowing lenders to provide eligible SMEs unsecured loans “more cheaply and more freely”.
Mr Smith says another option business owners could consider is Invoice Finance, which makes use of assets already in the business rather than using the family home for security.
“Put simply, using Invoice Finance brings forward payment of your invoices so you have cash in hand. You get 80% paid earlier, and the remainder later,” Mr Smith says.
Now may also be a good time to consider whether your business could benefit from a self-liquidating revolving line of credit facility, says Mr Smith, rather than further exposing yourself by taking on more loan repayments.
Get in touch
As mentioned earlier, if you think you might have a funding gap in your business, it’s good to act in advance - not when you’re scrambling to make ends meet.
So if you’d like to explore some funding options for your business please get in touch today - we’re here to help your business however we can.
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