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The End of the 2022 Financial Year: How to Help Your SME Clients

June 3rd, 2022

The end of the financial year is fast approaching, and the current economic landscape means that SMEs are likely to need even more financial assistance from brokers to both survive and thrive in the post-pandemic economy.  

Read on to find out about a range of issues currently faced by Australian SMEs and how you can help.

SME recovery after COVID-19

The SME Recovery Loan Scheme is designed to help small to medium-sized businesses recover from the ongoing effects of COVID-19 with affordable business loans. The Scheme is coming to an end on June 30. Loans approved by commercial lenders under this Scheme have a federal government guarantee of 50% of the amount borrowed. This guarantee makes it easier for eligible SMEs to get finance approval from participating lenders like Earlypay.

How brokers can help

Encourage all of your SME clients to take advantage of the SME Loan Recovery Scheme prior to June 30.

Purchasing assets to reduce tax liability

The temporary full expensing initiative allows businesses with an annual turnover of less than $5 billion to fully deduct the cost of new assets purchased in the current financial year.    

Businesses with an annual turnover of less than $50 million can also fully deduct the total cost of any second-hand assets purchased this financial year.

In addition, if the asset is technology, an additional 20% can be claimed as a tax deduction over the amount spent. For example, businesses that spend $50,000 on technology will be able to claim $60,000 as a tax deduction (i.e. an additional 20%).

Both the temporary full expensing initiative and the bonus technology deduction will be in force until June 30, 2023.

How brokers can help

Encourage all of your SME clients to take advantage of the temporary full expensing scheme prior to June 30 this year (and next year) to minimise their tax. If they don’t want to eat into their working capital, asset and equipment finance can help with the purchase of their asset.

Supply chain interruptions

There have been several business supply chain issues over the past couple of years, such as:

  • Domestic and international COVID-19 restrictions. 

While these restrictions have eased, the backlog means that the supply of many products has still not returned to pre-pandemic levels in many industries.  Longer lead times and higher shipping costs are a fact of life for many Australian businesses.

  • Lengthy wait time for some new assets and equipment.

In addition to delays caused by COVID restrictions, there has been an ongoing global semiconductor shortage over the past two years. Semiconductors are used in a diverse range of products, including cars, computers and various other forms of technological equipment. This has led to lengthy waiting times for many business assets. 

  • The high cost of fuel.

Even though there has been some temporary relief to soaring petrol prices since the federal government temporarily halved the fuel excise tax in the March Budget, prices are still high. They are likely to remain that way for the foreseeable future. 

Ongoing high fuel prices will impact the cash flow of any business that relies on fuel in their own operations, as well as those who rely on goods and services being transported by suppliers. These suppliers will invariably pass on their higher delivery costs.

  • The recent floods in Queensland and New South Wales.

The floods have disrupted the supply chain for SMEs both directly and indirectly. Some businesses in the flood-affected areas have had to temporarily cease or reduce their operations due to damage. This has a flow-on effect to other businesses who rely on the products and services of flood-affected businesses, as well as those who supply the flood-affected businesses. These suppliers may receive reduced (or no) orders or have to wait longer for payment.

How brokers can help

Suggest finance solutions to help your SME clients overcome supply chain issues. For example:

International borders reopening

Our international borders reopening creates opportunities for many businesses to ramp up their operations back to pre-pandemic levels and beyond. For example, wholesalers will experience an increase in demand to supply goods to the tourism industry. 

How brokers can help

Encourage your SME clients to exploit these opportunities via:

  • Invoice or Trade Finance (or both) to help businesses to pay for and supply more stock to customers.
  • Asset finance to boost the production capacity of SMEs.

The ATO chasing tax debt

The ATO has been lenient on collecting business tax debts over the past couple of years. This leniency was due to the tough times many businesses experienced because of COVID-19 restrictions and lockdowns. However, with COVID-19 restrictions easing, the ATO is now individually contacting customers to repay outstanding debts.

How brokers can help

Encourage your SME clients to unlock equity in their existing assets through Sale-back Finance. They can also use Invoice Finance to boost their cash flow and help them get rid of their ATO debts.

If you have client scenarios you’d like to workshop, we’d love to help! Please contact your BDM at Earlypay for assistance.

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