Does your small business require a business loan to recover from the COVID-19 downturn?

A recent survey conducted by Officeworks found 82 per cent of small business owners admitted their business is being impacted by COVID-19.

The research undertaken by Officeworks suggests that most of these businesses will be finding new ways to help their business succeed in the second half of the year.

One way will be to take advantage of the Federal Government’s instant asset write-off.

The instant asset tax write off enables small businesses to instantly deduct assets instead of claiming deductions over a number of years. It has been around for a few years, but this year the threshold for the instant asset write-off has increased, with businesses with an annual turnover of up to $500 million able to deduct products up to $150,000. This is a huge uplift from previous years.

Another way is to reduce fees such a tap and go fees by switching to a cheaper debit network.

These business ought to act soon.

Officeworks National Business Manager, Mark Kindness, said “According to our research, almost two in three SBOs have suffered a reduction in revenue with 34 per cent having projects cancelled, 27 per cent making pay cuts and over a quarter downsizing their entire business during the pandemic.

“The events of 2020 mean that, more than ever, small businesses need to leverage the support available to them, including initiatives like the instant asset write-off and make the most of tax-deductible products and purchases before June 30,” he said.

Problematically, only 40 per cent of small business see the end of financial year as a growth opportunity. 

These businesses may want to revise their outlook or they could become one of the more than one in six businesses expected to be insolvent when the government’s stimulus package ends in September.

Insolvency experts do expect a flood of businesses to fall off the “September cliff” after the ABS reported 72 per cent of businesses took a hit to revenue as a result of COVID-19.

Other than accessing the instant asset write off, SMEs should look to meet taxation and superannuation obligations and seek professional help from a qualified adviser.

They should also consider a small business loan.

Why you should consider a small business loan?

The economy is reopening and while Victoria is slower than most due to a spike in coronavirus cases, pubs, bars and gyms are now operating, albeit at a much reduced capacity.

This means there are costs to cover including wages, stock purchases and basic utility costs and overheads.

If you are one of the lucky businesses to have survived this period, then it could be worth considering a business loan.

It’s a good time to get one too, as the government’s SME Loan Guarantee Scheme, guarantees 50% of unsecured business loans from eligible lenders until 30 September. SMEs with a turnover of up to $50 million are currently eligible to receive these loans after the Scheme commenced in April 2020.  

The Government has approved 41 lenders to participate in the Coronavirus SME Guarantee Scheme. 

SMEs can access a range of secured and unsecured business loan products.

Here are InfoChoice’s top five unsecured loans:

Note, interest rates and application fees do vary, so be sure to read the terms and conditions to get the best loan for you.

InfoChoice also compares over 132 secured loans for small businesses:

So back to the fundamental question of why, here are three reasons to take under consideration …

  1. You need to get through COVID-19.

You know you are going to survive, but you’ll be doing it tough for some time to come as you have to meet the costs of running a small business. A small business loan will alleviate some of that pressure. It will free up cash flow, so you can pay for goods and services. It will help you keep vital staff on the books (and they will thank you for it). And, it will help you come out of the pandemic with a solid business that continues to help you meet your customers’ needs.

  1. You need more inventory

Inventory is crucial to keep your business running, but it is one of your biggest expenses. At times, inventory can drain as much cash out of the business as equipment purchases. It is likely, after you have been locked down for so long, that you will need inventory and it is important to not underestimate how much you need. If you were running a popular business prior to lockdown, you should expect people to come back. Essentially, you need to view your inventory purchases as an investment in the business and one that will deliver returns.

  1. Staff hire

Now you are back up and running you need staff and you need to pay them. A loan can facilitate this. Don’t overburden your team. Yes, they will have to do more than is normally required to help you get the business back on its feet, but you don’t want to burn them out either. Use a loan to hire the staff you need to fill the most important roles in the business. Invest in talent and make sure there is a clear connection between your hiring decision and increased profitability.

Compare secured and unsecured business loans here

This update is not financial advice. This article is general news and information.

Home Loans: The comparison rates are based on a secured loan amount of $150,000 and a term of 25 years.

Personal Loans: The comparison rates in this table are based on a loan of $30,000 and a term of 5 years unless otherwise indicated in the product name with^, in which case, the comparison rate is based on a loan of $10,000 and a term of 3 years. The comparison rates are for unsecured personal loans only for the relevant amounts and terms. The comparison rates for car loans and secured personal loans are for secured loans unless indicated otherwise.

WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. Comparison rates are not calculated for revolving credit products.

The products compared in this article are chosen from a range of offers available to us and are not representative of all the products available in the market and influenced by a range of factors including interest rates, product costs and commercial and sponsorship arrangements

InfoChoice compares financial products from 145 banks, credit unions and other financial institutions in Australia. InfoChoice does not compare every product in the market. Some institutions may have a commercial partnership with InfoChoice. Rates are provided by partners and taken from financial institutions websites. We believe all information to be accurate on the date published. InfoChoice strives to update and keep information as accurate as possible.

The information contained on this web site is general in nature and does not take into account your personal situation. Do not interpret the listing order as an endorsement or recommendation from us. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.

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