Every business in Australia is unique at the moment, says Robynne Frost.
Since brokers play a critical role in helping SMEs through the unchartered waters of the pandemic, it is essential they know what to speak about with their business customers during this climate of economic uncertainty.
Suncorp’s national manager of SME and commercial, intermediaries, says there are five key areas brokers should discuss with their SME clients now to ensure they are in the best place they can be moving forward.
1. Profile of the business
Frost says it’s important for brokers to be well informed about what is happening across the nation as well as the COVID-19 relief options for their clients.
“We are finding as an organisation that our customers are choosing to go to their brokers to get a really holistic view on what suitable options are available for their individual circumstances.
When discussing the profile of the business, it’s not just the type of business and industry sector that should be outlined. It’s also important to look at the interrupters in the market and how the business is positioned to withstand these.
“What is it about their business that has driven success and will that continue to be a successful model?”
“An example of that is businesses that have shut down but moved from face to face/shopfront to selling things online.”
She says that many businesses have been very creative in the way they have adapted to the challenges of the market, but that the conversation around profile also needs to steer towards future direction.
For most industries, the changes put in place now may point towards a new normal moving beyond the pandemic, and it is important to understand how SME clients are planning for the future, whether this is sustainable and what contingencies they have in place to cover planned or unplanned absences of key people.
2. Income of the business
A discussion around income should cover how and when customers normally pay as well as whether COVID-19 has impacted this. It should also look at when they forecast normal trade conditions to start again.
A lot of lenders are now asking for cashflow forecasts and it is important for brokers to be across this, says Frost.
“For a broker it’s really important to understand what that actually means.”
“The banks will be asking questions on where these numbers come from, if they are reasonable and if they actually make sense.”
She says for businesses that are reopening after lockdown, brokers should have an intimate understanding of what the forecast means and whether or not it is realistic.
The conversation around income should also include whether or not their debtor collections are well-controlled and whether they have sought any government or other financial assistance due to COVID-19.
“If they are still owed money, are they confident that it’s still going to come in or are the people they are owed money from still feeling the pain too?”
3. Outgoings of the business
A conversation around outgoings should look at payment cycles, outstanding payments and creditor payments and assess how up to date the business is.
Another big thing to consider is supply; many businesses currently feeling the pinch when it comes to the impact of COVID-19 on supply chains.
“If they are not keeping up with their existing creditors, but also, if they can’t get the stock they need that makes their business successful, what’s their plan of attack?”
4. Threats to the business
This should look at consumer demand and competition as well as whether the business is likely to be impacted by COVID-19, says Frost.
With some businesses thriving in the current environment, the impacts of COVID-19 have not been negative for everyone.
On the other side of the coin, those that have been threatened by the pandemic may have had to pivot in order to survive. Frost says the liquidity position of these businesses should be assessed.
“Do they close or do they completely change the direction of their business – and do they have the capital or the cashflow or security and potential backing behind them?”
Experience in the industry is another key thing to consider for businesses that need to change direction.
“If you’ve got a business that’s been in operation for a long time and they decide they want to go in a different direction, does their resume and their experience give lenders confidence that they’re going to be successful in this unusual time?”
Stages of recovery should also be looked at, she says.
This should assess their plan for recovery, how gradual it is likely to be and any compromises that may have to occur as part of this, such as reduced income or the loss of staff.
5. The future direction of the business
This involves understanding the plans and the aspirations of the business moving forward, and whether or not this is sustainable. A conversation around this should look at possible growth, changes in direction, the reasons for these changes and whether they can quantify what they are doing.
“Are they planning expansion, consolidation, winding it down or selling?”
A broker should look at the SME’s projected cashflow needs and assess their finance plans for this future phase.
“We believe the role of the broker is really critical right now to be having the right conversations and leaning in on their lenders to support them to have those conversations, because it will only help us to assist more small businesses.”
She says it’s also important for SMEs to engage their trusted business advisors outside of brokers to ensure they get as much information and support as possible to guide them in the right direction moving forward.