Finding the right solution for small business recovery

For all that COVID-19 has presented many businesses with enormous challenges, it’s also offered up new and exciting opportunities. The question is: how can your business customers ensure they’re in a position to survive – and even thrive in these uncertain times?

The answer lies in accessing the financial support that’s right for them, so that they can continue to meet their many costs, both fixed and variable, while financing any opportunities that come their way. Despite the many unknowns ahead, it’s clear that navigating any current or future challenges will come down to a business’s ability to adapt to new markets and the speed with which they do so. It will also rely on their ability to maintain capital. This is where you, as the broker, can be most valuable in helping your customers that are struggling to move forward.

Your first move? Get to know your customer

Before recommending any one financial option to your customer, it’s critical that you genuinely understand their business – their market position, their revenue and expenses, how they have been impacted by COVID-19, what their business plan is moving forward and more.

That requires you to ask detailed questions, as Suncorp has outlined here. Some of these may be similar to those you have asked in the past, but now they require a slightly different lens, and a deal of rigour, so you can tease out the unique challenges and opportunities each customer faces.

With that deep understanding of your customer’s business position provided by these questions, you can then consider the financial options available to them.

Is a government-backed loan the right choice?

The Australian Government is assisting businesses to stay afloat with the extension of JobKeeper payments progressing until the end of March 2021 for eligible businesses, as well as extending the Coronavirus SME Guarantee Scheme (“Scheme”) until the end of June 2021, again to eligible businesses.

There are two phases of the Scheme. The first is an unsecured loan of up to $250,000 that’s to be used for working capital only. It’s available until 30 September this year. Suncorp’s SME Support Loan represents an attractive short-term option, where the business is not required to make any repayments for the first six months, thereby giving them an opportunity to improve their cash flow during this period. 

However, the remaining 30-month repayment period requires the facility to be fully repaid which may present a challenge for some businesses given the relatively short-term of the facility. Ultimately, the loan’s suitability will depend on the business’s pre-COVID position and its plan for recovery.

Another factor is the scale of the business and the amount of capital it actually needs – the SME Support Loan may suit those businesses that don’t have a large capital requirement. It might also work well where a business is very buoyant with a high likelihood of returning to a positive cash flow once ‘normality’ has been restored.

The second phase of the Scheme was announced in late July and comes into effect on 1 October this year. It may be a secured or unsecured loan of up to $1 million, which can be used to help businesses fund a wide range of investments beyond working capital but cannot be used to finance property investments. Those who are eligible can borrow the money for up to five years.

This option will give businesses much more room to manoeuvre however unlike the first phase of the Scheme, they won’t necessarily benefit from the 6-month repayment holiday.

How about standard loan options?

Of course, the SME Support Loans are not the only loans available. If a business faces significant challenges, it may be that standard finance arrangements are more suitable. Suncorp’s Business Essentials, for instance can be secured, unsecured, or partially secured.

In fact, these financing measures may still offer a better option than those that require or involve the government guarantee providing more overall cash flow now

Could repayment deferral be the answer?

Loans aren’t the only option though. Deferral of repayments might be a good choice for businesses if cash flow is a pressing issue. Suncorp, for example, can offer its existing customers a six-month deferral or the option to extend the term of their loan. And this has just been extended further

It's a pragmatic, commercial way to deal with capital control. But, again, you need to understand and assess a business’s position first. If the decision to defer is tied directly to COVID-19, it makes sense. If your business customer was already struggling, deferring repayments could further undermine its weakened position.

Another concern is the fact that deferral could hinder any other impending decisions about the business that need to be made.

Want to know more about understanding the financial health of a business?

Suncorp’s Small Business CPD accredited SunEducation program offers broker partners comprehensive, market-leading support on every step of their diversification journey. It can help you better understand your small business customers and will show you how to identify opportunities and conduct an in-depth financial analysis. 

Suncorp stands ready to help

Clearly, there has never been a more critical time for brokers to connect with their business customers – to truly understand their financial position so they can offer the very best advice.

For more information on how we can assist your small business customers, speak to your Suncorp Small Business & Commercial BDM today.