Liquidity takes centre stage as one in four SMEs have no disaster response plan

Natural disasters have become a persistent and material risk for Australian SMEs, with the latest data from ScotPac’s SME Growth Index (SMEGI) Report revealing 65% of SMEs have been impacted by bushfires, floods or cyclones in the past five years.

Despite the risks, an alarming 26% of SMEs have not taken any action on disaster preparation.

The headline findings underscore the growing financial and operational strain placed on businesses right across the country as climate-related disruptions become more frequent and severe, especially at this time of year.

Related findings from the ScotPac’s SMEGI Report include:

  • 34% of SMEs reported direct losses, including property damage and inventory or stock destruction.
  • 42% experienced indirect impacts, such as production delays, operational downtime and increased insurance costs.
  • Larger SMEs were disproportionately affected, with 68% reporting disruption, amplifying the fact that the business impacts of natural disasters are no longer localised.

ScotPac CEO Jon Sutton said the potential for natural disasters should be factored into resilience planning for every SME, regardless of their location.

“Navigating natural disasters have always been part of doing business in Australia, especially for primary producers and tourism operators and the industries that depend on them,” Mr Sutton said.

“But when two thirds of SMEs report being affected, it’s clear that the impact of bushfires, floods and cyclones is growing, and more businesses are being affected.

“Natural disaster impacts are hitting more businesses, costing more money, and getting harder to manage without the right plans in place.”

Liquidity Critical to Resilience

In response to disaster-related impacts, a third of businesses said they would turn to their lenders for financial guidance, closely followed by suppliers and trading partners (32%). More than a quarter of SMEs have not sought any advice on disaster preparation.

Mr Sutton said those SMEs that have yet to take proactive steps to prepare for future events were vulnerable to avoidable disruption.

“Businesses that don’t plan for disruption are effectively betting against events that are now happening with increasing regularity,” Mr Sutton said.

Mr Sutton said liquidity, alongside insurance, was a central part of any natural disaster response.

“The SMEs that recover fastest are typically those that already have flexible funding options in place before they’re needed.

“Having access to flexible capital allows business owners to repair damage, support staff and maintain momentum during disruption. That’s where ScotPac can help,” Mr Sutton said.

He encouraged SMEs to consult with their brokers and advisers to ensure they had the right finance structure in place to protect:

  • Working capital during periods of downtime
  • Supply chain continuity
  • Short-term repair and recovery costs
  • Long-term business confidence and growth

One example of the type of product designed to support SMEs through periods of uncertainty is ScotPac’s new Line of Credit. It provides:

  • Fast, flexible access to funding of up to $500,000
  • Greater control over cash flow
  • The ability to draw funds as required and only pay for what is used.

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About the SME Growth Index

Commencing in March 2014, ScotPac’s twice-yearly SME Growth Index is Australia’s longest-running research report on SME sentiment towards revenue growth prospects.

The Round 23 research was conducted by East & Partners who interviewed 724 SME enterprises with annual revenues of A$1-20 million.

SMEs surveyed have operated continuously for an average of 16 years and manage, on average, 53 full-time employees.

Sectors represented in the survey included Property & Business Services (13%), Manufacturing (13%), Wholesale (12%), Retail (11%), Transport & Storage (10%), Personal & Other Services (10%), Construction (10%) and other industries including Mining & Resources, Agriculture, Media & Telco, Accommodation, Cafes & Restaurants, Finance & Insurance (non-bank) and Electricity, Gas & Water.

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ScotPac is Australia and New Zealand’s largest non-bank SME business lender, providing funding to small, medium and large businesses from start-ups to enterprises exceeding $1 billion in revenues. For over 35 years, ScotPac has helped thousands of business owners succeed, offering fast and flexible funding. From simple to complex, small to large, start-up, growth or turnaround – ScotPac can help with a range of funding including Invoice Finance, Trade Finance, Asset Finance, Line of Credit and Business Loans. ScotPac was recently awarded The Adviser Magazine’s Debtor Finance Loan of the Year for a sixth time.

For more information contact:

Todd Hayward
Mob: 0412 205 151