It goes without saying that the COVID-19 pandemic has had a major impact on businesses throughout Australia. 

The repercussions of the virus began well before Australia went into ‘lockdown’. When the Chinese government began requiring people to stay at home, trade between the two nations was immediately impacted, PwC reported.

Since then, Australia’s own reaction to the pandemic has led to unemployment, loss of productivity and supply chain disruptions. Within a year, PwC estimates a drop in Australia’s GDP by $34.2 billion.

Australia has not faced a recession since 1991, according to the Parliament of Australia. If the flow of effects from COVID-19 causes a recession, this will be a new disruption that our economy has to navigate. As businesses big and small work to get through this period of difficulty and uncertainty, many will rely on government aid to stay afloat.

Australia’s response to recession

In response to the economic slowdown, Australia has put the Coronavirus SME Guarantee Scheme (the Scheme) in place with the objective to support businesses that are struggling during this time. 

Committed to lending up to $40 billion to SMEs, including sole traders and not-for-profits, the programme will provide much needed support to businesses. New loans from participating lenders can be issued to SMEs until the deadline being 30 September 2020.

The scheme is available to any SME that has a turnover of up to $50 million, with a loan cap of $250,000 per borrower.

The loans are expected to be a major help to many businesses. An April survey conducted by found that 70% of businesses believe they’ll need a loan to survive the pandemic. According to Australian Broker, nearly one-third said they needed the money by the first week of May.

Businesses have also shown great interest in the JobKeeper Payment scheme, which will help to keep approximately 6 million people employed by providing fortnightly payments of $1,500 to workers through their employers. As of mid-May, 500,000 businesses have applied for funding through the scheme, Australian Broker reported.

Australian businesses continue to face challenges

While many SMEs will apply for funding, the general business sentiment is that cash won’t be made available in a timely manner. 79% of businesses indicated they aren’t confident that banks will be able to approve and settle Coronavirus SME Guarantee Scheme loans quickly. Confidence in other lenders isn’t much better; only 34% of respondents said they believed non-banks would be able to process loans faster than banks, according to the same April survey.

To add further uncertainty, businesses have no way of knowing which lenders will approve their requests for funding. The Scheme stipulates that lenders are in charge of how to manage loans and how to qualify borrowers.

With various lenders following different criteria in the approval process, businesses may have to play a waiting game. For instance, if a creditor denies funding to an SME, that business may be able to apply with another lender. However, they will have to go through a review and approval process once again.

“There is currently the very real and ongoing issue of bottlenecks in loan approvals among the banks,” Bill Baker, CEO of Lend Capital, said, according to Australian Broker. “ … (Businesses) will be forced to continue shopping around between lenders in an effort to secure much-needed funding.”

Bridging the gap between application and approval

Whilst much needed support may be on the way, Australian business owners will still need cash flow during the waiting period.

The JobKeeper scheme in particular presents cash flow challenges because of the way the program is set up. Instead of a loan, it’s a promise of reimbursement for employers who have already paid employees from March 30 until the time they receive the JobKeeper funding.

If businesses don’t have the money to pay employees in order to qualify for the JobKeeper scheme, they might consider turning to loans, which come along with risks, especially in this environment. An alternative and more reliable option is to use a resource like UnLock.

UnLock is a payment gateway that works with business-to-business buyers and suppliers. Businesses can utilise this resource to make necessary purchases funded through UnLock, then repay the funds over the course of a 30, 60 or 90 day period.

Businesses waiting for loans to come through or who are looking at choosing between purchasing necessary business supplies and paying employees, can use UnLock to stay afloat in the short term.

“By creating cash flow, paying suppliers and transferring the risk to ourselves, UnLock enables businesses to have more financial flexibility, particularly during this unpredictable time,” Leo Tyndall, CEO of UnLock’s parent company Marketlend told Australian Broker.

Businesses awaiting government support or considering alternative funding strategies can learn more about UnLock on their website.