Ombudsman updates business funding guide to help SMEs recover from COVID-19

Small and medium businesses that are seeking to survive the ongoing economic downturn now have another tool at their disposal, with small business ombudsman Kate Carnell this week releasing an update to her office’s business funding guide. 

First released last year in partnership with Scottish Pacific Business Finance, the independent guide is written for accountants, bookkeepers and financial advisors who help SMEs secure funding. 

The guide features a range of tools that advisors can use with their clients, including a funding decision flowchart and funding matrix to determine what kind of funding is best suited to the business’ circumstances.

It canvasses the funding options available to SMEs and also includes a ‘pathway’ or guide to how businesses can improve their chances of successfully obtaining funding. 

This new version of the report reflects the challenges posed to SMEs by COVID-19, said Carnell, who described the shift in focus as going from business growth to survival. 

“While many small businesses are still eligible for government support, these measures are temporary and plans will need to be made to fund their recovery, reinvention and growth,” she said in a statement. 

The federal government earmarked $40 billion for short-term, unsecured loans to SMEs, as part of its loan guarantee scheme in March this year. However, six months later, less than $2 billion of that had been lent out by approved lenders. 

This prompted a series of changes to the scheme in a bid to encourage more businesses to apply, and more loans to be offered by a bigger pool of lenders. 

However, Carnell said there’s a bigger issue at play: even without a global pandemic, small businesses “face an uphill battle” when trying to secure funding, thanks to “onerous” applications processes and “unrealistic serviceability requirements”. 

“Even for loans that have been 50% guaranteed by the federal government, small businesses have been asked for all sorts of documentation including director guarantees, which really means the family home,” she said. 

This is why it is important for business owners to consider a wider range of financial products and lenders outside the big four banks, said Carnell.

Equally, it’s essential that businesses make sure the lender they choose is a member of the Australian Financial Complaints Authority, and that they speak with an accredited financial advisor before signing up to a new loan. 

The business funding guide is available from the Australian Small Business and Family Enterprise Ombudsman’s website here.