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Small businesses big winners under election promises as campaign carries on

May 11, 2022

Small businesses big winners under election promises as campaign carries on

Australia’s small business sector looks set to win regardless of the election outcome with the two major parties both pledging their support for home-grown entrepreneurs.

Australia’s small business sector looks set to win regardless of the election outcome with the two major parties both pledging their support for home-grown entrepreneurs.

With Australians headed to the polls in less than a fortnight on 21 May, both Prime Minister Scott Morrison and opposition leader Anthony Albanese have turned their attention to small and medium sized enterprises (SMEs) in a bid to win favour with the largest employing sector in the economy

On Thursday, Morrison unveiled his vision to grow Australia’s SME sector – which currently accounts for more than 2 million businesses – by another 400,000 as part of his plan to add 1.3 million jobs to the economy if his party is re-elected.

Existing business owner were not left in the cold – Morrison also announced an additional $17.9 million would be invested into the Business Energy Advice Program (BEAP) – an existing service which provides business owners with two free advice sessions designed to help them cut their energy bills.

The additional funds would enable the BEAP to provide additional advice sessions to business owners. 

Opposition leader Albanese pitched more broadly, telling the Australian Chamber of Commerce and Industry that sweeping economic reforms outlined in Labor’s policies would improve productivity and reinvigorate economic growth.

“The fact is that the country has been drawing down on the sources of Labor’s productivity-enhancing economic growth policies for three decades now. We now need new reforms to drive growth in the decades ahead,” he said. 

“The sources of economic growth need to be replenished. A country cannot keep drawing from an old well, because the well eventually dries out. Economic policies that play around the edges don’t position the country for the long term.”

Importantly, Mr Albanese’s reforms would include changes to the current industrial relations system – changes which Council of Small Business Organisations Australia (COSBOA) CEO Alexi Boyd welcomed.

“The fact of the matter is that the award and enterprise bargaining system for determining wages and working conditions is too complex and time consuming for small business owners,” Ms Boyd said.

“They remain in the quagmire of a system which they can’t navigate. This is a position that has been advanced for COSBOA by many years, and one which we brought to the IR Reform Working Groups.”

The opposition leader however raised eyebrows with COSBOA and other small business industry associations on Tuesday when he said he would support a 5.1% increase in wages – a move some say will crush small businesses.

“There is a clear risk that a high increase in wages without improved workplace productivity would fuel inflation and increase the likelihood of a steeper rise in interest rates to the detriment of growth and job creation,” Australian Industry Group CEO Innes Willox told Australian Financial Review.

Ms Willox said small businesses support wage growth, but that increases above 5% would be unsustainable.

Cash flow remains major concern for small business

While these proposals have been met positively, small businesses still face challenges managing their cash flow – data from the Australian Bankers Association (ABA) shows access to cash flow financing remains one of the top drivers for SMEs to take out borrowing products.

And the scale of small business lending in Australia appears to be increasing. The ABAs SME Lending Report 2021 found small business owners borrowed $10 billion from banks in the three months to August 2021.

That was up from $7.9 billion during the same period in 2020, the ABA said.

A similar story played out in the medium-sized business sector, where bank lending in the three months to August 2021 reached $19.3 billion (up from $13 billion).

The banks may not see all of this windfall, however. Two separate studies – one by JPMorgan Chase and another by financial data analytics firm FICO – have found small businesses are increasingly turning away from conventional channels to achieve their business goals.

FICO’s report even found 38% of Australian SMEs are now considering using alternative lenders to meet their borrowing needs, citing difficulties with ease and speed of access to capital when using traditional banks as a primary driver in their decision.

Michael Davidson, CEO of small business finance platform and alternative lender Propell Holdings Limited, said the swing away from banks has been a long time coming.

“The banks have been pretty slow to roll out new options for SMEs and for many small business owners, the older processes and systems the banks use could jeopardise the future of their entire operation,” he said.

“They can’t afford to wait two weeks after making a loan application with a bank, especially when there’s no guarantee that the lender will ultimately approve them. That delay can mean the difference between growing their business, or shuttering permanently.”

Propell has seen its own client base rapidly grow in the past year as SMEs clamour to find new sources of finance – the business has seen its client base grow by 420% to roughly 1700 in the 12 months to March 2022.

It’s on track to double that figure by the end of 2022, Mr Davidson added, noting the average loan size taken out by each of these clients has also grown.

Mr Davidson said this upswing in SME borrowing activity has been a net positive for lenders, especially alternative lenders like Propell.

Propell’s CEO Michael Davidson will join us Friday, 13th May, at 12pm (AEST) to share his insights into SME financing and the company’s plan to capture a growing share of Australia’s total $423 billion SME loan book. Click here to attend.

Reach* Corporate provides Corporate Advisory Services to Propell Holdings Ltd and has been engaged by them to manage their investor communications and may receive fees for its services. Past performance is not a reliable indicator of future performance

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