Having been through a few cashflow crunches in my business life I have learned a few lessons the hard way

IMO Business is going to need a lot of help from Govt to survive

Many people will complain that help should be going to individuals & I don't dispute this

However if we lose large numbers of businesses, we will lose an order of magnitude more jobs

Those who lose their jobs can't spend, can't eat, can't pay rent, mortgages or tax, therefore more businesses crash & the circle continues downwards

After the Bushfires, the Floods (in Syd) cash was already tight for a lot of businesses

In my experience, Christmas was always a tight time for cash from Dec until mid Feb but they dont appear to have got a break

Add to this, manufacturers & retailers who are dependent on the Chinese supply chain (which has been effectively closed for months) will hit a wall

Now going into lockdown will hurt those same businesses

Its tough to assemble hardware or serve a customer remotely

Add to this the shutdown of inbound tourism, airlines, hotels, restaurants, Ubers & drivers

Then just for fun, remove higher education, overseas students & crash in productivity for existing businesses as their teams try to work out how to work in a remote environment

Unless you have run a cashflow constrained business its not immediately obvious how big a problem this multiplier effect is

Many small-medium businesses are self-funded or have lines of credit secured against their homes

They dont have a few months cash buffer

I remember in 2000 when we had a near recession & beginning of the dotcom bomb, customers just stopped spending & stopped paying their bills & we very nearly ran out of cash

The natural inclination is to hoard cash (not just toilet paper) logical

But the multiplier effect kicks in, businesses start missing payroll, they don't pay other businesses, they have very little credit

Businesses stop selling on credit, then their customers cant trade

They have to lay off staff who stop spending & its tough to break the death spiral

So a few suggestions on how we get through this, I believe some states may have started on some of these ideas, its a moving target

Businesses need cash now, but without residential security its impossible for most to borrow

One of the new initiatives is a 50% reduction in PAYG, this is a great way to ensure cash is used for employment but the only issue is most businesses wont see the effects for 2-3 months

In the interim businesses need flexible unsecured low-interest lines of credit sufficient to cover 3 months expenses inc staff

This could be facilitated quickly by Govt providing Guarantees on existing credit cards & lines of credit provided they dropped the interest rate

And allowing banks to sign up new lines of credit with similar low doc requirements they used to use for Mortgages for SME

Perhaps if needed also relax capital adequacy laws so the banks can actually make the cash flow

How do we get cash flowing?

Payments:

Government (local, state, Fed) could mandate all accs payable to be paid within 7 days or immediately via credit card for <$20k invoices & large businesses/public companies pay within 30 days

How do we get everyone spending?

IMO it has to start with Govt spending practices

If we want to ensure we recover we must prioritise our spending as a nation on AU businesses, services & products

Suggest that Federal, State & Local Governments mandate that all Govt Department spending is restricted to Australian manufactured products & services for the next 6 months & suspend Govt spending on non-AU products & services for 6 months

To make it easier for Govt & Business to do this we need a collection of Australian Products & Services

An AU Products & Services Marketplace

Spending on foreign product/services should be by exception only & restricted if there is an AU equivalent

Govt could encourage their departments to start spending, dust off & launch infrastructure plans & lift the ASL & start hiring aggressively

We could also launch a local infrastructure initiative similar to the Insulation scheme but focused on 2 key issues

Solving Water & Power for Residential & Commercial

Water tank grants (for locally made tanks using local steel)
Solar & Battery Grants (with a minimum AU content)

This will get tradies & low skill workers working & will boost AU manufacturing & longer term will give more disposable income to homes & businesses (no power or water bills ever)

We could also fund Greenhouse programs to help Farmers become more drought-tolerant made w AU steel

Yes this will cause a budget blow out, but that train has left the station, the Q is how do we ensure this is a 1yr prob not a 5 yr problem

Not interested in political diatribes but I welcome suggestions to improve the probability of survival of Australia's business

This is a great step forward to solving this problem https://amp.theage.com.au/politics/federal/covid-19-25-2-billion-cash-injection-to-save-jobs-20200321-p54cjo.html?__twitter_impression=true

This is on the right path

Perhaps this could have a cap on the interest rate to reflect the risk-free guarantee of 50% of the loan, perhaps somewhere between an unsecured personal loan & a mortgage

What will kill this is banks charging 20% interest

https://www.business.gov.au/risk-management/emergency-management/coronavirus-information-and-support-for-business/coronavirus-sme-guarantee-scheme