SMEs should be using the Government’s financial support packages to buy them enough time to make critical decisions that will determine the future of their business.
The Federal Government is currently providing up to $100,000 to eligible small and medium sized businesses (SMEs) and not-for-profits to help with cash flow so that small businesses can continue to operate, pay rent, electricity and other bills, and retain staff during the COVID-19 pandemic.
These and other measures were announced in March by the Morrison government and have been embraced by a significant number of Australian businesses facing financial hardship.
Financial assistance is timely and critical for some SMEs during this period. However, it is important that business owners don’t let rescue packages cloud their clarity of thought when it comes to making major business decisions. Financial assistance is only a very short-term cash flow solution. Business owners must address the challenges they face head-on and in a timely manner. Accepting financial assistance may only buy you a bit more time to make those big decisions such as:
-Restructuring your business
-Reducing staff numbers
-Changing the direction of your business
-Shutting the business down completely
Know your options
Despite the proliferation of SME lenders in recent years, small business owners are still very much in the dark when it comes to financial matters. Most people start a business because they are technicians in a certain field and can offer a specific skill, service, or product that others are willing to pay for. Their focus is on their chosen craft, rather than the financial affairs of the operation.
Finance brokers are technicians too. Understanding how to structure business finance appropriately to unlock cash flow and capitalise on opportunities is a skill that requires an experienced financial professional with access to a wide range of solutions. Government support is one option, but it is by no means the only one.
The reality of the current economic environment is a brutal one. But going down the path of accepting financial assistance could lead to even greater financial complications down the road. Refinancing could become unavailable and access to additional credit may be denied if you have claimed financial hardship. These are some of the risks that business owners who are not financial technicians need to consider.
Whether you are struggling to pay the bills or managing to keep your head above water, the ability to access finance and manage cash flow is critical if a business is to survive. Keeping your options open and staying informed about the risks of each option will help guide you to where you and your business need to be.
But above all, be prepared to make the tough decisions when it comes to your business. Restructuring your finances, with or without the help of Government support packages, could be the first step in a new direction for you and your company.