Support package welcomed but small business may need more
Apr 15, 2020
The recent announcement by Government to extend further support small to medium enterprises is very welcome.
Based on feedback from members of the BusinessNZ network, small businesses are struggling with cash-flow, have no idea of when they might reopen their doors, but still have to maintain rent, interest and insurance on top of wages.
The wage subsidy, which has paid out around $9 billion dollars in the last three weeks, goes a long way to help employees, but it doesn’t support the businesses themselves, and many are facing a very uncertain future.
SME’s desperately need the added support and the question is whether it will be enough?
The majority of the next stage of assistance for business will come from changes to the tax system. In a key move, firms will be able to get cash refunds of previous tax payments.; The arrangement will let them offset current losses against the profits of a previous year and get a refund of the tax paid during the profitable year.
This will be a significant help for many firms’ cashflow problems. Nationwide, it’s estimated this measure could mean refunds and reduced tax bills of around $3 billion over two years.
Businesses will also get more flexibility around paying tax, with IRD empowered to push out the deadlines for tax returns and payments.
Today’s announcement also includes a change to the rules around commercial tenancies - landlords will face a longer period before being able to cancel a lease. Further thought is also needed on how to address the current risk facing owners of commercial rental properties, many of them small businesses themselves.
Today’s announcements also supports business advice, which will be critical for businesses - along with capital and cashflow - as they come out of the crisis.
These changes supplement other measures that the Government has already taken including the loan guarantee agreement that allows businesses to be assessed on a pre-crisis basis for loan eligibility, extending work visas, amending insolvency law, depreciation deductions and waived interest on some tax payments.
The question remains will it be enough for businesses to stay alive during the post lockdown phase of recovery and this is an issue the BusinessNZ Network will continue to bring to Government’s attention.
As one of the main drivers of the economy, it is critical that small businesses can recover, regenerate and rebuild. We can look to other countries to help guide what further amendments may be needed.
For example, Australia has instituted direct grants to small businesses to support immediate cashflow needs. The Australian rent relief scheme is also fairly even-handed and requires commercial landlords to provide rental relief to tenants based on the tenant’s decline in turnover, while requiring banks to support both landlords and tenants with flexibility during the lockdown.
Canada has instituted an interest-free loan scheme, which makes up to $40,000 available to qualifying small businesses.
But we don’t have to look abroad for all the answers and we don’t have to guess what SME’s need, they are telling us daily. In the thousands of phone calls and messages it is clear they want to get back to work, do it safely and they want help with some of the issues that can slow down that recovery.
For this reason the Small Business Council has recommended we identify the regulations that are hardest on small businesses and suspendithem until the lockdown is over. Another suggestion is to introduce technology credits, to help businesses buy the digital technology and software needed for e-commerce. This would help many small businesses come out of lockdown well-prepared for 21st century trading.
Larger businesses should be encouraged to take every step to involve small businesses in their own economic recovery operations, and to pay invoices to small businesses promptly.
And as customers and consumers, we should all buy from and support our local small businesses as soon as the lockdown is over.
This is the right time to focus on small businesses and their needs, their sustained growth will provide much needed jobs as we recover from Covid-19.