State border closures heighten small business pain

The latest state border closures across Australia came at a difficult time for family and friends looking to celebrate the new year together, but they also came at a challenging time for SMEs. According to ScotPac CEO Jon Sutton, the border closures are likely to affect small and medium sized business across countless industries at a time when many would be in the middle of their best trading period of the year.

He added that while public health is foremost at the moment, business will bear the brunt of it – particularly those in the currently locked down Northern Beaches of Sydney.

“Those particular businesses are going to be severely impacted,” he said. “It’s distressing for small business owners and I would really like to see a more coordinated approach to these lockdowns and not the holus-bolus state lockdowns that we’re currently having at the moment.”

It’s a sentiment clearly articulated in ScotPac’s most recent twice-yearly SME Growth Index research, which polled more than 1,250 small business owners or leaders in September and October last year. In the report, almost two-thirds of participants (64%) nominated open borders as their most needed recovery factor, with 25% expressing a preference for greater Federal Government control over such measures.

For many SMEs, the recent wind-back of restrictions and newly opened borders came as a boon at the start of the festive season, as Australians booked regional and interstate holidays for the first time in months. Now, as we settle into 2021, this promise of strong economic activity has been cut short as people cancel their travel plans and act more cautiously when it comes to leisure activities.

This will come at the expense of businesses of all shapes and sizes, with those in the tourism and hospitality sectors likely to be hit the hardest, said Sutton.

“No two industries are the same but those that have been affected the worse are going to take longer to come out of recovery and will put their businesses at risk as these lockdowns go on further and further,” he said. “Business owners know that hard lockdowns make it harder for us to do business and to be able to serve different customers’ needs right across the spectrum, so the longer we have these hard border lockdowns, the more impact it has on business.”

Read more: Securing finance for SMEs

Added to this is the challenge of avoiding insolvency; 11% of the report’s participants listing this as a concern for 2021. Sutton said this is heightened by the fact that relaxed insolvency rules have now gone back to the way they were before the pandemic.

“I would be urging any SME businesses that have concerns about trading insolvent to be talking to their professional advisors, their lawyers and their accountants,” he said. “There is the ability for smaller business to be able to restructure their debts.”

Read next: More than 10m Australians to be impacted financially by COVID-19 – study

He added that brokers also have a pivotal role to play.

“Brokers are really in tune to what their customers are doing and what their customers are going through,” he explained. “I would be imploring brokers to forget about the holiday period now and be really on the front foot.

“They need to be on the phone right now to their customers, asking them how they feel, asking them how their businesses are going, asking them what they may need in the next three months and six- to 12 months, and then brokers need to be talking to the financiers.

“Brokers can actually look at different solutions to be able to ease some of the short-term cash flow problems that customers may have as they work to get back up on their feet. ScotPac will work tirelessly with the broker community to be able to satisfy some of those needs.”

Each business will have its own unique set of challenges coming out of the pandemic, whether it is a newly established company or an older enterprise - which is why a thorough assessment of its cashflow statement will prove essential, he added.