Small Business Ombudsman suggests HECS-style loan scheme

With the Federal Government's JobKeeper subsidy set to end in March, Australian Small Business and Family Enterprise Ombudsman, Kate Carnell is urging the introduction of a HECS-style loan scheme for small businesses, to provide cash-flow over the next 12 months.

Carnell, is urging the Federal Government get the scheme running suggesting that such a scheme may make the difference between survival and financial ruin.

With rent relief ending and COVID-19 lockdowns and border closures having a devastating effect on businesses across the leisure industry, Carnell believes that access to finance will be vital for small businesses.

Speaking yesterday, she advised “unfortunately, it’s a perfect storm scenario - especially for those small businesses that haven’t been able to fully recover from the COVID crisis.

“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.”

Carnell (pictured below) has called on the Federal Government to introduce a revenue-contingent loan program for small businesses, similar to the student loan scheme HECS, requiring borrowers to repay only when their turnover reaches a designated level.

The loan would be Federal 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 “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 a rise this year in the number of businesses entering voluntary administration.

“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.”

As the inaugural Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Carnell works as an independent advocate for small business owners. Her office has the legislative powers to effectively influence Australia’s lawmakers, ensuring legislation and regulations are put in place to help small businesses grow.

Before Christmas, Carnell was responsible for the Small Business Ombudsman’s Insurance Inquiry Report which called for urgent action to address what it described as widespread market failure over the availability and affordability of insurance products for small businesses.