More than one in four businesses (26%) have been knocked back in trying to get finance over the past three months, according to the August Sensis Business Index.
The figure was worse in the bush with 37% of those applying in our Regional towns being knocked back compared to 25% in our cities. The number of businesses applying for finance has dropped to 13% (16% in March 2020, 17% in December 2019).
Overall 13% of businesses surveyed sought finance assistance with 22% in Melbourne applying, 21% in Sydney and 17% in Canberra.
Breaking the findings down by industry sector, the worst affected was the Transport/Storage sector with 60% of businesses knocked back with just 20% approved.
· 56% of businesses in the Cultural and Recreational Services sector were unsuccessful and just 22% successful (22% are still waiting for a decision).
· 45% of business in the Health and Community Services were knocked back
· 15% of businesses in Construction/Property were knocked back with 77% successful.
· 9% of businesses in the Communications, Property and Business Services sector were knocked back with 73% successful
Nearly four out of 10 businesses (36%) said they believed it was more difficult to get finance since the start of Covid-19 with 51% saying it was about the same and 12% saying it was easier.
Regional businesses said it was 40% more difficult and 35% in our major capital cities.
Brisbane topped the scales at both the easier to get finance (15%) and more difficult (40%). Most cities were similar when it came to finance being more difficult with Perth at 38%, Melbourne 37%, Hobart 33%, Sydney 32%, Canberra 30% and Adelaide 29%.
Looking at the figures by industry, 42% of Accommodation/Cafes/Restaurants businesses said finance was more difficult to get followed by 41% in Transport/Storage, 40% in Cultural and Behavioural and Other Services, 38% in Retail, 37% in Construction/Property, 35% in Communications, Property and Business Services, 33% in manufacturing, 31% in Wholesale and 28% in Health and Community Services.
Conversely, 17% of Health and Community Services said it was easier to get finance followed by 16% in Wholesale.
There also seems to be a delay in decisions from financial institutions, with overall 14% still awaiting a decision.
From a financial perspective
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."
