This week the Reserve Bank of Australia elected to maintain the cash rate again. For the first time though, they have given a nod to a possible drop in the cash rate and some notable commentators have indicated they think this will happen within the next six months.
When coupled with the uncertainty surrounding the upcoming State (NSW) and Federal elections and the difficulty businesses are already facing in obtaining finance in a post royal commission environment, we hold grave fears for the performance of small businesses over the next 12 months.
Whilst there are many things that could impact your business in coming months, a look at the crystal ball has us recommending that all small business owners and investors get their ducks in a row.
What do we mean by this? And why is it so important?
What do we mean?
The traditional avenues of funding have been relatively simplistic to date, with the vast majority leaning on bank finance in its many forms. However, you can no longer assume you can get finance AND even if you can, it is a time consuming, expensive and troublesome exercise. It can take upwards of 13 weeks for a basic loan approval to a low-risk lender, reams of paperwork, and much more security required than ever before.
Why is it important?
Discretionary spending may dry up if the crystal ball we’re looking into is accurate, and the ability to access finance for short-comings in cashflow is what many businesses rely on to survive.
What can you do about it?
- Keep on top of your cash flow forecasting. Cash out and cash in, and the timing of all this is critical.
- Keep a buffer on hand wherever possible. Rainy days may be coming.
- Talk to your business adviser about how accessible finance is for you. Ask them what your lending capacity is, what is involved in obtaining it and what you can do to improve it.
It’s a brave new world out there for business finance access at the moment; the rules have changed and you need to know what your finance options are in case you need to lean on them.