The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell is calling on the Federal Government to establish a loan scheme for small businesses as other government stimulus measures wind down. 

The revenue-contingent scheme, Carnell argues, would help small businesses get access to the cash flow they need to survive the year without the support of subsidies including JobKeeper and rent relief. 

"Unfortunately it’s a perfect storm scenario - especially for those small businesses that haven’t been able to fully recover from the COVID crisis," Carnell said.

"Access to credit will be critical to keeping those otherwise viable small businesses afloat, particularly over the coming months as support measures are phased out and the bills start flowing in again," she said. 

Carnell suggests the scheme could operate similar to the HECS loans, requiring borrowers to repay when their turnover reaches a designated level.

The loan would be Government-funded and capped at a percentage of the small business’ annual revenue.

Applicants would need to satisfy a viability test conducted by an accredited adviser to be eligible.

Carnell added that recent COVID implications including lockdowns and border closures are keeping small businesses hesitant about taking out any new loans. 

"Sudden lockdowns and border closures have heavily impacted small businesses in recent weeks – it’s no wonder they are scared to take on additional bank debt given conditions can deteriorate so rapidly. 

"Even in the best of times, small businesses have struggled to secure finance.

"Taking into account the enormous challenges they are now facing, the fallout of insufficient working capital could be devastating, not only for small business owners and their staff, but for the broader economy.

"The latest ASIC data shows external administrator appointments were up by 23% in December 2020 and economists are predicting the number of businesses entering voluntary administration to rise this year.

"A revenue-contingent loan scheme would give small businesses the confidence they need to seek funding, so they can survive and employ again.

"It’s essential to Australia’s economic recovery," she said. 

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