With many small businesses hurting right now and many desperately seeking financing options in recent months, to stave off the impacts of the Covid pandemic, a recent report has revealed that more than one in four (26 per cent) of them have had their finance applications rejected.
The recent Sensis Business Index revealed that disapproval rates are much worse in regional areas at 37 per cent compared to 25 per cent in the major cities. As a result of the lack of confidence in the business arena, the number of businesses applying for finance has also dropped to 13 per cent. These results appear to be better than what businesses are actually suggesting at the coal face.
Industries most affected include the transport/storage sector with 60 per cent of businesses knocked back, 56 per cent in the cultural and recreational services sector, 45 per cent in health and community services, 15 per cent in construction/property, a further 9% in the communications, property and business services sector.
The survey highlighted that 36% of businesses believe it is more difficult to get finance since the start of COVID-19, with 51 per cent saying it was about the same and 12 per cent saying it was easier. Regional businesses indicated it was 40 per cent more difficult.
Obviously, many businesses are struggling to demonstrate debt serviceability due to declined revenues. Hence, we are faced with a situation where - at a time when businesses critically need capital, they are unable to get it through the usual sources of funding.
This probably explains why more regional businesses were being declined by financiers and why banks are taking a very conservative approach to funding businesses and property assets. If you are in hospitality, there is no clear view when normality will return and what that will look like.
Right now, we need to understand what virus economics is and a good understanding of government policy regardless of one’s political beliefs - moving forward. These are the keys to understanding how things will unravel and how best to navigate the landscape.
At UHY Haines Norton, we are continuing to keep a check on the economics surrounding the finance markets. If you have any queries in this area feel free to call the team on 07 49 721300.