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Government urged to establish HECS-style SME loans

The ASBFEO has called on government to fund a revenue-contingent loan scheme for SMEs to help them manage cash flow once support measures end.

The federal government has been urged by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell, to establish a revenue-contingent loan scheme for small businesses to provide them with the cash flow they need to survive the next 12 months.

According to the ASBFEO, the loans are needed as SMEs approach a “perfect storm” of government support measures being withdrawn, the end of rent relief, “onerous credit assessment processes”, and the impact of recent lockdowns and border closures.

Ms Carnell suggested that the government-funded loans could be similar to HECS, in that they would only require borrowers to repay it once their turnover reaches a designated level.

They should also be capped at a percentage of the small business’ annual revenue, she posited, adding that applicants would need to satisfy a viability test conducted by an accredited adviser to be eligible.


Ms Carnell explained: “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.

“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,” Ms Carnell said.

“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.”

Ms Carnell warned that new support was needed to help SMEs manage the tailing off of COVID support, particularly given that economists are predicting the number of businesses entering voluntary administration to rise this year.

She concluded: “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.”


The ASBFEO has previously called for such a loan program to be established. In September 2020, the small business ombudsman suggested that a revenue-contingent loan could have been a useful alternative to the Coronavirus SME Guarantee Scheme (the first phase of which saw little take-up).

[Related: Two-thirds of support line callers were seeking finance help]

Government urged to establish HECS-style SME loans
Government urged to establish HECS-style SME loans

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