Despite the government’s loan guarantee scheme, over a quarter of small businesses are being knocked back for finance according to results of a recent Sensis survey.

Twenty-six per cent of small businesses have had their loan requests refused over the past three months according to the August Sensis Business Index. And if you’re a regional business owner that figure is even worse with 37 per cent of finance applications denied.

Nearly four out of 10 businesses (36 per cent) said they believed it was more difficult to get finance since the start of Covid-19.

Looking at the figures by industry, 42 per cent of Accommodation/Cafes/Restaurants businesses said finance was more difficult to get followed by 41 per cent in Transport/Storage, 40 per cent in Cultural and Behavioural and Other Services, 38 per cent in Retail, 37 per cent in Construction/Property, 35 per cent in Communications, Property and Business Services, 33 per cent in manufacturing, 31 per cent in Wholesale and 28 per cent in Health and Community Services.

Tarek Omar, from financial services firm Royce Stone Capital, said securing bank funding is harder for businesses that are impacted by Covid-19 as they will no longer be able to demonstrate debt serviceability due to declined revenues.

“Unfortunately you have a situation where at a time when businesses critically need capital, they are unable to get it through traditional sources of funding.”

He said Regional businesses, especially those in agriculture that used to export overseas to Asian markets and/or were supplying domestic hospitality businesses, have been severely impacted. “This could explain why more regional businesses were being declined by financiers from the survey,” he said.

“Right now the banks are taking a very conservative approach to funding businesses and property asset prices. The market doesn’t know when things will go back to normal, especially for businesses in hospitality.

“Cash flow based businesses such as those in hospitality don’t have any line of sight when their pre Covid-19 revenues will return to what was previously normal.

“Virus economics combined with government intervention, presents very different challenges compared to when market forces work naturally. Having an understanding of government policy regardless of one’s political beliefs moving forward is key to understanding how things will unravel and how best to navigate the landscape.

“Business owners need to be resilient, to look at new ways of operating and above all plan for how they will grow post Covid-19,” Omar concluded.

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