Similar to HECS, a revenue-contingent loan program would require borrowers to repay when their turnover reaches a designated level, according to Ms Carnell.
Under such a scheme, the loan would be government-funded and capped at a percentage of the small business’s annual revenue, and applicants would need to satisfy a viability test conducted by an accredited adviser to be eligible.
Ms Carnell said that with government support measures being withdrawn, banks continuing to subject small-business borrowers to onerous credit assessment processes, rent relief ending and the impact of recent lockdowns and border closures, access to finance could mean the difference between life and death for many small businesses.
“Unfortunately, it’s a perfect storm scenario — especially for those small businesses that haven’t been able to fully recover from the COVID crisis,” she said.
“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.”
With sudden lockdowns and border closures heavily impacting small businesses in recent weeks, Ms Carnell said it’s no wonder they are scared to take on additional bank debt given conditions can deteriorate so rapidly.
“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,” she said.
“The latest ASIC data shows external administrator appointments were up by 23 per cent in December 2020 and economists are predicting the number of businesses entering voluntary administration to rise this year.
“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.”