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Corporate profitability improving | Businesses confident about future | Twelve Grains Capital

Businesses increasing their cash holdings and profits: RBA

Business profitability has improved as the economy has started to recover, according to the Reserve Bank of Australia. The RBA said that while business revenue, in aggregate, remains weaker than a year ago, this has been more than matched by reductions in operating expenses. Furthermore, improved trading conditions and policy support have helped businesses maintain the large cash buffers they accumulated in 2020. “By late 2020, companies' holdings of cash and deposits covered more than five months' worth of expenses on average, while unincorporated businesses had over two months' worth of buffers,” according to the RBA. “While this partly represents firms reducing expenses, it is mostly accounted for by increased cash holdings. “In addition, some businesses hold committed lending facilities with banks that they could draw on if needed. These savings are expected to support businesses through the recovery.” Got cash-flow concerns? We can help

Businesses feeling bullish about the future

Business confidence has hit a seven-year high, according to the latest reading of the monthly Roy Morgan Business Confidence index. Confidence in March increased to a reading of 124.0, which is:

  • The highest reading since January 2014 (131.5)

  • Massively higher than March 2020 (95.1)

  • Significantly higher than the long-term average (113.6)

A number above 100 signifies positive confidence; a number below signifies negative. Other key findings include:

  • 61.2% of businesses expect good times for the economy over the next 12 months

  • 59.4% feel the next 12 months is a good time to invest in growing the business

  • 52.6% expect the business will be better off financially in 12 months

Businesses can now apply for government-backed loans

Australia’s big four banks have started offering loans under the federal government’s SME Recovery Loan Scheme. Under the scheme, which will run until 30 June 2021, the government guarantees 80% of the loan amount, making it easier for businesses to qualify for finance. Other conditions include:

  • Businesses can borrow up to $5 million over a term of up to 10 years

  • Loans can be either unsecured or secured (excluding residential property)

  • Loans can be used for a broad range of business purposes, including investment and refinancing

  • Interest rates are capped at about 7.5%

  • Lenders can offer repayment holidays of up to 24 months

Businesses that want to participate in the scheme must have a turnover no greater than $250 million. Also, businesses must either:

  • have received the JobKeeper payment between 4 January 2021 and 28 March 2021

  • be located or operating in eligible local government areas impacted by the floods in March 2021

Scammers using email tricks to steal money from businesses

Businesses are being hit hard by payment redirection scams, according to the ACCC. Australian businesses reported over $14 million in losses in 2020 – and average losses so far in 2021 are more than five times higher than in the same period last year. In a payment redirection scam, scammers impersonate a business via email, and request that money – which usually is owed to the legitimate business – is sent to a fraudulent account. Sometimes, scammers hack into a legitimate email account, intercept legitimate invoices and amend the bank details before releasing emails to the intended recipients. Other times, scammers impersonate senior executives by using an email address that is very similar to that of the genuine email address. The scammer will then request that staff transfer funds to them or make a payment to a third party on behalf of the business. More information on scams is available on the ACCC’s Scamwatch website, including how to make a report and where to get help.

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