The biggest challenges for small business today are access to affordable capital, late payments and red tape. The policy actions reportedly being considered by the Morrison Government address all three of these concerns.
These latest policies are a very welcome extension of the Government’s strong past support for small businesses in Australia as they address the big issues keeping small business owners awake at night.
“The PM’s focus on small business was strong during his time as Treasurer (introducing positive measures such as lower tax rates for small business and the instant asset write-off) and these measures show he is continuing that focus as Prime Minister”, said COSBOA Chair Mark McKenzie.
The issue of late payments has long been an issue for small business and COSBOA has strongly supported the Australian Small Business and Family Enterprise Ombudsman, Ms Kate Carnell, on this issue in recent years.
"Big business using small business as a bank by regularly withholding payment of invoices for up to 120 days is obscene and must be addressed", said Mr McKenzie.
But the other burning issue is access to affordable capital needed to fund business growth.
“The only time a small business owner finds it easy to get finance from a bank is when they no longer need it”, said Mr McKenzie.
“Growing concern about access to capital was one of the key reasons we partnered with the Reserve Bank of Australia and the Australian Banking Association earlier this year in a high-level roundtable to discuss small business financing in March of this year”, Mr McKenzie said.
Since then, the Banks’ response to the Royal Commission has made it even harder for small business to get access to affordable credit.
Finance problems are biggest for start-up businesses - or established business that is looking to expand - as banks rely solely on past earnings and don’t take future earnings potential into account.
“It is pointless providing tax cuts and instant asset write-off to encourage small businesses to grow if they cannot get access to affordable capital”, Mr McKenzie stated.
“We are very happy that the Government is considering the merit of Government-sponsored small business finance schemes like those used in the UK and Canada”, Mr McKenzie said.
These programmes involve the Government sharing the risk of small business loans with the financial institutions and are typically given to small business owners who cannot get access to affordable capital needed to grow.
By sharing the risk with the financiers, qualifying businesses get access to the money they need to grow at an affordable rate.
The Canadian Small Business Finance Scheme provides loans to businesses of up to $5M turnover and issues around 10,000 loans totalling $1BN to small businesses each year. It has been operating for more than 50 years.
Importantly, these businesses must still demonstrate a capacity to service the loan, but greater weighting is given to the earning potential in the future - rather than simply relying on past earnings.
COSBOA looks forward to seeing the detail of the policy measures being proposed by the Government.
“Employing more than 6.5M Australians at last count, more than 50% of all working Australians, the only thing small about ‘small business’ is its name and therefore an investment in small business is a significant investment in Australia", concluded Mr McKenzie.