The Liquidity Crisis Is Coming!
10 minute watch
Host Brenda Thomson talks with Martin Cattach from Finance for Business about the looming Post COVID Liquidity Crisis.
The economy, particularly in Victoria, will not start to see the full effects Covid-19 on small business until the first and second quarters of next year. This is due to the end of many government support measures, and the most important of these will be Job keeper that has been an immense support for small businesses.
Loss of this support will cause many businesses to fail, and it could be 10% or as high as 25% that will fall into what Martin calls the cascade effect. That is, a company that goes into receivership or uses the new proposed chapter 11 system will affect all the business that supplied that business as they will only receive a percentage of what they are due to be paid. This will in turn threaten their viability, and they could well become insolvent and have to windup, so we get a chain reaction across the economy.
This situation will be further complicated with property values declining and many small businesses will find their banks, who have used property security for business loans, unsupportive and may see their facilities substantially reduced.
That is the looming Liquidity Crisis that businesses will face.
Martin is a director of Finance for Business and his mission is to provide small business with the Working Capital and the Cashflow they need to enable them to grow and prosper in today’s tough business environment by providing an alternative to borrowing from the Big Banks as well as delivering advice and insights the business needs to grow.
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