Finance a hurdle to hiring staff: survey

By Sarah Stowe | 16 Sep 2019 View comments

Funding is available for franchises says Ganesh Chandrasekkar, GM of SME Banking at Westpac after report shows SMEs face growth barriers. Small businesses are showing reluctance to hire more staff, despite looking forward to business growth over the next 12 months.  

Although small businesses are matching the wider economy in growth terms, they are falling behind in increasing their employee headcount, according to the latest Westpac Small Business Report in collaboration with Deloitte. 

Small business owners face specific hurdles to increasing employment: financial (38 per cent), infrequent staffing requirements (28 per cent), and wages and penalty rates (24 per cent).

Westpac funding

Commenting on these statistics, Chandrasekkar told Inside Franchise Business, “It’s not a surprise given margin pressure in the segment driven by slow economic growth. But there is light at the end of the tunnel, with small businesses expecting conditions to improve over the next 12 months, off the back of more political stability since the election and the expected economic flow through of interest rate cuts, infrastructure spending and housing market stability.

“Equipment finance is a good bellwether for where the economy is heading. We’ve had some strong performance over the last couple of months that shows businesses are testing the market. We haven’t seen that translate to big investment decisions yet, but I think that will come once there’s a turn in consumer confidence.”

The research is based on a survey of 500 Australian small businesses from all industries, but does not draw distinctions between independent and franchised businesses.

Small business customers cited quick access to finance, unsecured borrowing and a speedy digital experience as important.

“This led Westpac to expand its unsecured lending offer from the beginning of 2020, to help more small businesses access funds to manage growth and cash flow when they need it most,” said Chandrasekkar. “Our unsecured lending offer for small business will be designed to reduce complexity and improve our ability to assess loan applications allowing us to increase customer eligibility. It’s estimated an extra $10 billion will be available in unsecured, conditionally approved limits, without the need to put up other assets as security.”

The bank will continue to offer franchising accreditation, he said.

“At Westpac, we approve 93 per cent of lending requests received. Despite this, two in three business owners don’t request funding, which can leave many small businesses cash-strapped.

“We’re here to help with $30 billion ready to lend to small businesses, including franchisees, for the right investments. We are also expanding our unsecured lending, which will help small business franchisees access funds to help manage their business and provide access to cash when needed.” 

How can franchisors and franchisees improve their chances of getting funding?

“It’s important franchisors and franchise buyers understand the loan assessment process and what information they need to provide. This includes providing a comprehensive business plan, proposed franchise and lease agreements and all personal finances and living costs.

“There are a lot of factors that need to be considered so engaging with your financier or reaching out to a Westpac Business Banking expert early in the process means we can help discuss the requirements and identify any issues quickly before focusing on the outcomes.

“Another way to support growth, is to look for ways to gain efficiencies across the business.”

Key statistics

  • The report reveal one third of small businesses have taken on a second job to supplement household income.
  • The gig economy is proving a helpful solution for many small businesses who need flexibility and easier access to casual employees. 
  • The average small business household gets two thirds (63 per cent) of income from the business. However, one in five (20 per cent) small business owners have no income outside their business and 15 per cent would lose equity in their home if their business were to fail. 

“This places an extraordinary amount of pressure on business owners, their families and employees, for the business to perform. With over half of Australian small business owners using their personal savings to establish their business, this can have a deep impact on their mental and financial wellbeing,” said Chandrasekkar.