BUSINESS FINANCE NEWS – NOV 18, 2020

A brief summary of news you probably missed!


Companies Teetering|A New Era|Zero Rates

some companies are teetering on the edge of bankruptcy

Teetering on the Edge

“SME’s are struggling to collect cash and make payments quickly indicating they are still at the cliff’s edge and may well fall as soon as government support is withdrawn,’’ according to Harley Dale, chief economist at Creditor Watch.

In the company’s October Business Risk Review, Dale says that rather than handing out more money to keep failing companies afloat policy makers should be encouraging them to wind down while creating a safety net for those who will lose their jobs.

“Otherwise, a sudden wave of insolvencies could quickly derail any economic recovery.”

 New Era Unfolds

November heralds a further step forward into the era of open banking – one that will surely shorten the time it takes to secure a business loan.

Since July, you have been able to give third parties access to any account and credit card information held by one of the big four banks. Now, you can give them access to data about your mortgage, personal loans and joint bank accounts.

This should make it easier to explore and switch between providers; obtain better services and prices and save time and money.

 Collect the Cash

True or not, it is accepted wisdom that more businesses go broke from poor cash flow than poor profits.

In this helpful article from SmartCompany , accountant, Remco Marcelis, offers some important strategies to overcome lumpy cash flow and strengthen your business.

It’s a good read and worthwhile if your business is struggling to manage cash flow.

Escapology

A new post from pre-insolvency company De Jonge Read provides a fascinating account of a client who decides he no longer has the passion he once had for his business and wants out.

Unfortunately, the company is carrying significant debt, for which the owner has signed personal guarantees. The expected sale price won’t cover the debt – leaving the client’s family home at risk.

The writer explains how DeJong Read was able to extricate the client from his potentially crippling situation and allow him to move on with his life relatively unscathed.

Government Grants.

Is it time to get your hands on some of the millions of dollars’ in grant money available to businesses?

If so, here is a short guide to what is available and what you should do to get the process started.

 Low Rates

Australia’s low interest rate regime will remain low for “as far as anyone can see,” according to Peter Martin, Visiting Fellow at ANU.

We will also get plenty of advance warning that rates will go up, he says.

Writing in The Conversation he says the Reserve Bank has revised the trigger for determining rate rises.

Previously, the trigger was very fuzzy. Now it is measurable.

The RBA has indicated the board will not increase the cash rate until actual inflation is sustainable within the 2% – 3% target range. Given recent history. That is not going to happen quickly.

Another View

Queensland University’s John Quiggan  identifies a key reason interest rates will remain at zero or below.

He points to a long-term decline in the “neutral” rate of interest which is normally defined as the real (inflation-adjusted) rate of interest which is neither expansionary (pushing up inflation) nor contractionary (pushing up unemployment).