Three recent studies, including one by Bibby Financial Services - Flexible Cash Flow Solutions point to a worsening situation for small businesses, challenging the federal government to respond with interest rate cuts and appropriate budget measures.
While welcoming the budget measures confirmed by Treasurer Wayne Swan recently regarding tax loss carry back measures and immediate write-offs of assets for small businesses, Gary Green, National Sales Manager at Bibby Financial Services also says that the case for small business tax cuts remains strong.
For instance, Dun & Bradstreet’s Business Expectations Survey reveals declining expectations for Australian businesses in the coming September quarter, with significant reductions in both projected sales and profits anticipated by executives.
Similarly, ASIC statistics show that 1123 companies, most of them SMEs with fewer than 5 employees were placed into receivership in February 2012, the highest number on record since the statistics were introduced in 1999.
Mr Green also refers to the Bibby Barometer Small Business Survey, which ran in February this year, and showed that challenging local and global economic conditions were increasingly set to impose greater cash flow problems on small and medium enterprises, leading to decreased expectations for sales and profits.
According to the latest Barometer results, 26% of SMEs have been having difficulties meeting liabilities to suppliers on time, and 24% have had difficulties making their tax payments.
He regrets that the banks did not take the opportunity to pass on the full 50 basis points reduction to small businesses and consumers following the Reserve Bank’s interest rate cut.
Calling on the federal government to provide tax relief in the budget for the struggling small business sector, Mr Green comments that the SME’s challenges are exacerbated by issues such as conservative lending terms and the need to secure loans against collateral when obtaining traditional bank financing.
He also attributes the recent growth in debtor finance funding to the tough economic conditions in which SMEs currently operate.