Reserve Bank of Australia’s decision to leave the cash rate on hold today will help the country’s two million small and medium sized businesses grow, one of Australia’s leading fintech financiers said today.
The Invoice Market CEO Angus Sedgwick said that small businesses were the “backbone of our economy, contributing more than $343 billion to industry each year, and employing more than seven million people”.
He said, “Today’s decision by the RBA to leave interest rates on hold is good news for Australian small businesses as variable rates are currently as low as 3.26%. Reliable, cheap funding is important in helping SMEs grow, as they employ almost 70% of all Australians in the sector”.
“Small and medium sized businesses are the engine room of job creation, and the creative heart of its future prosperity. If banks can provide lower costs of funds to small business, the entire economy will benefit”.
According to the Australian Bureau of Statistics, half of all businesses go out of business in the first three years. And according to the Australian Securities and Investment Commission, poor cash flow is mentioned as a factor in 40% of business failures.
Almost half of all small to medium businesses have no policies in place to protect themselves from cash flow problems.
The Australian Government’s 2015 Financial System Inquiry found that small to medium businesses acquired money from a range of sources including extra equity, debt from relatives, debt from financial institutions or equity from venture capital funds. Mr Sedgwick said, “Maintaining interest rates at historically low levels would assist Australian SMEs grow, but cash flow strategies were up to individual companies to manage”.