No doubt 2020 was a very challenging year for the majority of Australian SMEs. The Australian Government did a reasonably good job at dampening the economic blow of Covid with the job keeper and other stimulus packages and the Reserve Bank of Australia correctly followed suit with their quantitative easing strategies.
Unfortunately, these measures do not entirely negate the significant impact 2020 had on SMEs including the multitude of financial challenges they had to navigate. More than half of all Australian SMEs saw turnover substantially decline and profit margins lower resulting in reduced cashflows.
Alternative funding on the rise
According to the SME growth index, almost half (46%) of SMEs have opted to pursue alternative funding sources to overcome financial challenges. A large proportion of these SMEs (31%) are looking to fund the diversification of their products and services whilst almost a quarter (24%) will utilize alternative funding to purchase new or replacement equipment for their businesses. Further to this, 21% will utilize need funding to increase their cash reserves with 20% of these businesses also opting to refinance existing loans.
Many SMEs have balance sheets that are heavily over-leveraged due to increased debt, reduced turnover, and limited cash flow availability. This lack of liquidity and limited financing options through traditional banks are causing SME growth and sustainability to be significantly hampered. To stay afloat, SME business owners are dipping into their personal funds to prop their businesses up. A staggering 90% of SME business owners stated that they would rely on their personal funds to support their businesses during a downturn. Whilst this may be an effective solution in the short term, this approach really does not set SME’s up for long-term success, growth, or financial wellbeing.
Reviving your business post covid-19
So where to now? 2021 is showing business confidence is increasing and the economy is recovering well. Most SMEs are returning to some sort of new “normal” with turnover on the rise. The majority of business owners are working longer hours to bolster their books and get their respective businesses back up to full speed, but financial challenges remaining looming.
Fortunately, as an SME business owner, you can overcome these financial challenges with a range of new and innovative financial products now being offered in financial services space designed to get SMEs back on track without putting personal financial well-being at risk. Innovative products such as working capital loans, asset financing, merchant cash advance and line of credit are just some of the options available to SMEs to manage their cashflows and grow their business.
You can discover your funding options at Swoop. Swoop simplifies and speeds up the funding process, matching businesses with the right funding opportunities tailored to your business needs. Simply sign up in less than 2 minutes and discover more!
Written by Wes Stevens