3 Ways to Sustain Your Business During the Coronavirus Pandemic
Australia is in the middle of the Coronavirus pandemic and it seems like daily life has been turned upside down in a short period of time. In fact, it seems the entire world has been turned upside down by COVID-19.
As social distancing conditions continue to alter the way we now live and work, there’s little doubt people are intent on persevering through the challenges and have high hopes of returning to normal again.
Australia’s Small to Medium Enterprises (SMEs) are familiar with the confusion and worry brought on by the Coronavirus outbreak. Both permanent and temporary closures have impacted the economy. Interruptions in supply chains, staff concerns related to the virus, and a multitude of other issues have not let up for months.
Review Your Business Insurance Portfolio and Premiums
The first thing you can do to take control of your business financials is to review all outgoing costs. You’ll want to evaluate what you’re paying for different expenses and determine if there’s anywhere you can trim a little fat.
One area to review closely are your insurance policies. For instance, look at what you’re paying for public liability insurance. Is it a competitive premium? Is the coverage comprehensive or could you find a better plan?
You can do some online comparison shopping when you check out BizCover’s website. Take a few minutes to get a public liability insurance quote. You can get even more coverage information, as well as an estimated premium either online or over the phone. Compare the Market is a further resource, an unbiased platform to aid your decision-making and explore information provided by multiple sites, to find the best supplier for your needs.
If you don’t have a public liability plan, then you’ll want to get one right away. This type of insurance will keep your company from absorbing financial damages and legal fees associated with negligence, including property damages and personal injuries. By having a public liability policy, you won’t have to dip into your company’s checking account should you find yourself dealing with an unhappy client.
The Federal Stimulus Package: Asset Write-Offs
A large portion of the Australian workforce is employed by small companies, like your business. That’s why it’s no surprise the federal government has quickly introduced a bundle of financial programs to help mitigate the financial damage caused by the virus. Some of the stimulus offerings include waiving admin fees and extra charges, providing wage subsidies, and introducing rent relief.
One important way the federal government assisted small businesses was to increase their available cash by changing the $30,000 standard asset write-off threshold to a robust $150,000. Although this tax change is temporary and only applied until the close of the 2020 fiscal year (June 30), it increased the annual turnover of $50 million to a whopping $500 million.
Changes to the asset write-off meant that instead of subtracting the annual depreciation value of a business asset from your taxable income over several years, businesses could immediately deduct 100% of an eligible purchase. You could deduct as much as $150,000 in applicable business expenses immediately rather than dividing the cost up over several years. By doing this, your small business could experience a significant reduction in payable businesses taxes for the 2019-20 fiscal year.
Hopefully, you used the new asset write-off rule and acted fast to take part in this one-time-only financial boost. It’s fair to say the federal government offered a nice incentive to any companies that recently invested in big ticket items. If your small business was able to utilize that tax perk, then you may find a little more cash available in your business account today.
Alternative Financing for Small Businesses
If your small business doesn’t have a lot of cash in your business bank account, particularly during such an uncertain time, alternative financial options may be a good solution. Over the last decade, alternative lenders have been catapulted into popularity among SME owners. Many of the business owners already believe nonbank and alternative lenders can better assist companies than traditional lenders.
For this reason, in April 2020 Australia’s “SME Loan Guarantee Scheme” was announced and it involved five fintechs: Liberty Financial, OnDeck, Moula, Prospa and GetCapital. Under the SME Loan Guarantee Scheme, the Australian government guarantees half of three-year unsecured business loans up to $250,000. The Australian government capped the SME Loan Guarantee Scheme at $40 billion in total SME loans. This federal business loan guarantee applies to loans issued by eligible lenders, including the five nonbanks mentioned above, and loans issued between 14 April and 30 September. The idea is to get small businesses in a solid financial position by securing working capital loans quickly and easily.
This national plan is perceived as positive since many small companies find it incredibly challenging to obtain meaningful financial options through traditional lenders. There is often a complicated and long loan process involved when SMEs work through banks and other institutional lenders. This can be discouraging to small business owners particularly when they need a quick surge of cash flow for operational expenses and equipment purchases.
Nontraditional lending solutions may not be the first choice for every small business just yet. However, many companies do appreciate the value of new concepts and creative solutions during such an adverse, challenging time. SMEs might now turn their attention to alternative lenders to meet their needs for fast loan decisions and fast loan deposits.
The Bottom Line for Your Small Business
The bottom line for your business is making sure you have enough funds available to make payroll, pay rent/mortgage, and cover all your other business costs during this global pandemic. Your main objective right now is to get through this uncertain economic period, so your business is around for the economic recovery. By reviewing your outgoing expenses (e.g. public liability insurance), using the revised asset write-off rule, and applying for a capital loan from a nonbank lender, your business will survive the COVID-19 pandemic.