Government launches bushfire loans, grants for SMEs

More than 80 blazes are still burning across NSW and Victoria, despite downpours over the weekend dampening bushland that has been burning since the end of last year.

With access to some regional areas still cut off, tourism taking a nosedive in affected areas and many businesses suffering from loss of income – the federal government has now launched a package of support for small and medium-sized enterprises (SMEs) that have suffered direct fire damage, or have been indirectly economically impacted following the bushfires.

Loans

In order to help small businesses with enough cash flow to run their operations during the bushfire crisis (which has not only claimed lives and destroyed property, but also caused access issues and drastically reduced tourism), the government has said it will provide loans of up to $500,000 to businesses that have suffered significant asset loss or a significant loss of revenue. 

The loans – which are also available to farmers, primary producers and non-profit organisations – are for a term of up to 10 years and are to be used for the purposes of restoring/replacing damaged assets and for working capital.

The loans will be available with a repayment holiday of up to two years, with no interest accruing during this period.

Subsequent interest rates would be set at 50 per cent of the 10-year Commonwealth government bond rate (currently around 0.6 per cent). 

The government has said it will be seeking the agreement of the states to provide these loans under “harmonised, consistent terms and eligibility criteria”.

Grants

Similar to grants announced by major banks such as the Commonwealth Bank of Australia (CBA), the government has said it will build on the disaster recovery grants put in place by state governments by providing top-up grants to eligible small businesses and non-profit organisations.

The grants program, which is uncapped, will enable businesses and organisations that have sustained damage as a result of the fires to access up to $50,000 in grant funding (tax-free). 

A $3.5-million Small Business Bushfire Financial Support Line has also been announced, along with an additional 10 financial counsellors, to help provide SMEs with information on the assistance and support available to them.

The government has also confirmed that taxpayers in bushfire-impacted postcodes who run businesses will now have until 28 May 2020 to lodge and pay business activity statements and income tax returns. 

Impacted businesses that pay their Pay-As-You-Go instalments quarterly will also be allowed to vary these instalments to zero for the December 2019 quarter and claim a refund for any instalments made in the September 2019 quarter. 

It is hoped these measures will assist small businesses with much-needed cash flow support during this difficult time.

“This comprehensive package will make it easier for those who have suffered direct fire damage, or have been indirectly economically impacted following the bushfires, to get back on their feet,” a joint statement from Prime Minister Scott Morrison, Treasurer Josh Frydenberg, and Minister for Employment, Skills, Small and Family Business Michaelia Cash reads.

“This package deals with the challenges we know small businesses in these areas are facing, and will continue to face.”

The new measures are in addition to the $2-billion bushfire relief package released by the government earlier this month and a number of grants already available for small businesses through the Disaster Recovery Payments.

SME industry welcomes announcement

The move follows on from meetings with small-business organisations – including a roundtable with the chambers of commerce from fire-affected regions, the Australian Chamber of Commerce and Industry and the Council of Small Business Organisations Australia last week – and aims to help keep the “engine room of the economy” (small businesses) running.

The small-business community generally has welcomed the support package, with Peter Strong, CEO of COSBOA, stating: “We didn’t get all we wanted but this response is comprehensive and sends the right signal to communities about being supported, without putting the wider national economy in peril. This disaster is so huge and sobering that there are going to be some business casualties no matter what is done by government. 

“We particularly welcome the extension of the Disaster Relief Grants for small businesses affected by the fires. We asked for grants of $20,000 for affected businesses but the government has gone further than that by announcing grants of $50,000, which is great”.

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell added that the new measures would help “assist small and family businesses deal with the extraordinary challenges they are facing as a result of the devastating bushfires”.

However, Ms Carnell called for “a tailored financial recovery plan,” and a grant for small businesses that will enable them to “go to their trusted adviser for a customised strategy”.

“Without it, the chances are they won’t survive,” the ASBFEO warned.

“In the meantime, fast-tracked infrastructure and a commitment to ‘build back better’ is absolutely vital,” she said.

“As part of the rebuild, all levels of government should be procuring from local businesses wherever possible.

“We broadly welcome the government’s efforts to help small business and will continue to advocate for measures to enable small businesses to get on with getting back on track,” Ms Carnell concluded.     

Alex Brgudac, the head of partnerships at SME lender Prospa, also welcomed the package, stating: “Every small business is unique, but cash flow will be the biggest challenge for most, and the new government grants and loans will offer a much-needed cash injection. 

“During this difficult time, small-business owners still need to cover wages, rent, bills and other overheads, let alone their own income. Additional funding can help provide some breathing room and keep the doors open until business picks up down the track.”

Brokers urged to help SMEs

Echoing calls made by the managing director of the Finance Brokers Association of Australia, Peter White, Mr Brgudac also urged the broking community to help regional businesses impacted by the fires, telling The Adviser: “The small-business community in rural and regional Australia will need our support. Access to funding is more important than ever, and it’s vital brokers have strong communication with all their small-business customers and work closely with their aggregator and lender BDMs if they’re unsure of the different options available to them”.

Mr Brgudac added: “The response from the broker community already has been incredible, but this is only the beginning.

“I also encourage everyone to buy regional where they can through #buyfromthebush or #spendwiththem to help keep these businesses trading.”

[Related: AFG offers bushfire grants to brokers and their customers]