Is Government Stimulus Package selective?
Whilst Covid – 19 is here and is awful for the community as a whole, it is especially tough on the small business community. Covid-19, once dealt with will actually make way for a recession due to there only being so much money any Government can throw at the economy to stimulate it.
Unfortunately, Australia is long overdue for a recession as the last one that we had was in 1990/1991. Prior to Covid-19 the Reserve Bank of Australia cut rates 5 times beginning on 3 August 2016. An interest rate cut is designed to stimulate the economy by giving people cheaper money in order to make big purchases such as a house or car. Accordingly, that money cycles through the economy through sales. For example, the bank gives the loan to build a new house, from these funds some of the money goes to the builder, of those funds some of that money goes to his suppliers whilst other parts of that money goes to his bills and household expenses and so on. In saying this, these interest rate cut have not been as stimulating as in previous occasions for a variety of reasons.
The Stimulus package from either Federal or State Governments is not designed for every business. It is designed to help small businesses that prior to Covid-19 had a successful business and because of the direct effects of Covid-19, now either do not have a business at all such as nail salons or the business has been dramatically reduced. For example, if you are the owner of a restaurant that was consistently turning a profit of $5,000 per month but due to only being able to serve takeaway customers, the sales of the business have dropped by 50% or more and thus the profit has eroded, the stimulus package is definitely for you to use.
If you had a business that prior to Covid-19 was struggling, the stimulus package really is not for you. During the period of shut down, you should be looking at the root cause of the issues with your business. Is it a sales issues, is it a costing issue, is there still a need for your product or service, is there a marketing issue etc? Do not misunderstand me, if you are able to get the stimulus package, I would recommend doing so and putting that money towards your root issue of the business to get it back on track.
If the issue with your business is because you have too much debt, we should talk about how to restructure your business today and give you a fresh start at life without all the debt and all the stress that goes a long with debt issues.
The way that we restructure a business is very different to the way an insolvency practitioner restructures a business with the main difference being that you maintain control of your business.
We know the views of this article is not popular, however it is necessary to discuss the true purpose of the stimulus package.