VIC reaches credit "crisis point"

by Madison Utley28 Oct 2020

A Melbourne-based lender that specialises in short term business finance has seen a 200% surge in loan applications as small businesses struggle to stay afloat, battered first by the lengthy lockdown period, then rejected by the country’s major lenders as their need was reaching its peak.  

According to HomeSec Business Finance CEO Paul Stone, Victoria has reached a “crisis point” in terms of its businesses’ inability to borrow money. While the entirety of Australia is celebrating the reopening of the state, the reality is many businesses are not in a place to capitalise on the repealed restrictions.  

“We are receiving hundreds of calls a day from business owners who are desperately wondering how they will get funds to restart and reopen,” Stone said.

“Business owners are telling us while it’s great they are finally allowed to reopen, they have burnt through their savings just trying to stay afloat, and now they can’t access the funds they need from traditional sources.

“As so many industries, particularly in the hospitality and tourism sectors, have been closed for so long, they are simply unable to show recent cash flow records because there has been little or no cash flow for months.

“As a result, most business lenders won’t touch them. This has created a credit crisis at a time when business owners need access to urgent funding more than ever.”

Businesses have also been reporting the insufficient cash flow issue has made the federal government’s business loans challenging to secure as well, Stone said.

“We are hearing from so many business owners saying they have been unsuccessful in obtaining one of these loans, or the loan amount on offer was not sufficient for their needs,” he explained.

“Many builders and property developers are also reporting that projects are unable to commence due to funding now being unavailable through the traditional funding sources.”

With the short term business finance provided by HomeSec ranging from $20,000 to $2 million and being available to “any type of legitimate business”, the group is well positioned to help meet the need of the businesses being shunned by the banks.

“Funding is available within 24 hours from the time of the initial application. As all loans need to be secured against real estate, this enables clients to be able to freeze repayments for up to 10 months if necessary,” Stone added.