Business Owners to navigate more lender uncertainty during Covid Recovery

As the dust begins to settle, and businesses see normality returning, there’s a confidence and even urgency fuelling the property market. For those depending on lender support though, there is a financial lag and level of caution that business owners in particular now need to navigate.

A typical situation might be that savings are up due to lower spending. Business cashflow has been supported by government subsidies such as grants and job-keeper. And now is the time to get into the market, capitalise on that investment opportunity, or make that move to a regional location. However, the financial impacts of Covid will be carried by businesses for at least the next 6-18 months.

This is because, in many cases, the 2020 financial results are lower than normal, and once the non-recurring Covid income items are stripped out, the profit figure doesn’t look as good on paper as it felt.

So how will lenders treat the business financials?

Generally speaking, they want to revert to their usual policies, which means that most businesses will be able to borrow much less than they could have 12 months ago, and what they will likely be able to borrow in another 12-18 months. But with the market moving so quickly, waiting doesn’t always feel like an option.

Proceeding will be a rocky road, but here’s some tips to consider:

1. Review BAS Sales

The easiest argument that business has returned to normal trading is to show that 2021 YTD Sales have returned to within approximately 10% of 2019 levels. In this case, some lenders will simply use the average of the 2019 and 2020 result, which may be enough.

2. Use Bank Statements

Where recent sales results (at least 3-6 months) can be demonstrated using clean bank statement history, by exception an assessor may be comfortable to sign off that the business has recovered.

3. Choose a lender whose policy matches the situation

All lenders calculate borrowing capacity differently, and it is during times like this, that the nuances can create very different results for a business. For example, whether a lender will take an average of the last 2 years, or only apply the worst figure, will make a big difference. Also, whether the lender takes full account of items like depreciation and existing liabilities, will also change the result.

4. Apply a finance lens to your business reporting

We’ve covered this before in our features, generally at tax time. It has never been more important for your finance person to get to know your accountant, to ensure that everyone is on the same page when it comes to debt planning. Whether it might be today or in a years’ time that you need the assistance of a bank, the earlier you can prepare everyone for an application process, the better.


For more tips & advice, contact Lanie Conquest or Nicola Tucker at Surf Coast Finance

With over 40 years combined banking & financial services experience, they help local families & businesses make smart financing decisions.

Ph: 03 5264 7702



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