There is evidence of a link between small business finance and economic recovery in the Australian context. Experts believe that bolstering and supporting our SMEs (Small- and Medium-sized Enterprises) with finances and good policy-making can lead to better outcomes and a more robust national economy.
While COVID-19 has adversely affected the business sector, small businesses are certainly, specifically, and more disproportionately affected. This is because they are in a vulnerable position—operating on a small scale and likely in the industries that are more sensitive to the impacts of COVID-19. For example, those industries that are hard hit by restrictions on movement, such as cafes, restaurants, arts, and recreation.
After the disruptions caused by the pandemic in the first half of 2020, conditions have been slowly improving for the Australian small business. Access to finance from lenders was tightened in the early stages of the pandemic. But soon after, restrictions were eased, and support was extended through fiscal stimulus, provision of credit and finance, credit guarantee schemes, reduced interest rates, and even deferrals on loan repayments for a short period.
While it is true that businesses should be more reluctant to take on debt in this uncertain climate, not wanting to add further to their pressure. However, many companies have made use of a range of available avenues and temporary measures to further strengthen their operations and survive the present conditions. We see this reflected in the improved rate of recovery for the Australian economy that is gradually moving out of the slump at a similar pace as our SMEs.
This blog post discusses the link between small business finance and economic recovery and the evidence that supports this interconnection. If you run a small business or are an entrepreneur working on your own initiative, you may be interested in the details that we discuss herein.
Lender's perspective of SMEs
The Australian Banking Association's (ABA's) 2021 SME Lending Report, released in November 2021, highlights the importance of the Australian Small and Medium Enterprises (SMEs) to the country's economic recovery.
According to the report, the small business sector is driving Australia's economic recovery, enabled by financial options available to them and an appetite for innovation and digital transformation. Lending institutions are helping ensure a flow of new credit is made constantly available to small businesses, and, in turn, this money is being injected into the economy.
Powering economic recovery
There are positive signs that economic confidence is growing in Australia, with lending to SMEs on a steep rise, despite the general assumption that there would be hesitation. This continued lending to small businesses is a good demonstration of the market confidence and trust in SMEs and their potential to perform in an uncertain climate. It also points to the vital role that SMEs play in the recovery of the Australian national economy.
Not only are SMEs availing of more loans and financing options provided to them, but they are also making their loan repayments on time. This is clear from the drop in the deferrals on repayments.
Accelerated digital transformation
One of the most significant impacts that the pandemic had on SMEs was that it made it imperative for many businesses to actively engage with digital technology to adapt to changed conditions. This accelerated implementation of digital technologies has, in turn, opened up new opportunities and innovation to tap into online and new markets.
The latest Federal Budget announced tax incentives and investments to encourage small businesses to invest in technology and training. Efforts are being made to bridge the technology gap for companies that are still disconnected or lagging, and this is being driven by tech-sector SMEs. Thus, SMEs continue to grow and consecutively spur overall economic growth.
Growing your small business
Grow your small or mid-sized business with advice from Oakmont. We are Small Business Insurance specialists. Whether you are looking for succession planning, key person insurance, employee benefits or business expense planning, or preparing your business for investors with specific guidance on superannuation, insurance, and income and expense reporting, we have you covered.
At Oakmont, we add value to your business. We assist you in maximising your potential while being strategic and staying authentic. Contact us today for an obligation-free consultation.
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The information contained on this website and in this blog post is general in nature and does not take into account your personal situation or circumstance. It is recommended that you consider and use the information provided responsibly and, where appropriate, seek professional advice from a financial adviser. Although every effort has been made to verify the accuracy and correctness of information, Oakmont Financial Group, together with our consultants, officers, agents, and employees, disclaim all liability for any loss or damage suffered by any persons directly or indirectly relying on this information.