Brokers urged to watch personal spending

Brokers need to be prudent in their personal spending, as small businesses face mounting tax debt, says Neil Cribb of RSM Bird Cameron.

Brokers need to be prudent in their personal spending, as small businesses face mounting tax debt, says Neil Cribb, RSM Bird Cameron director of turnaround and insolvency.

“When it comes to the finance broking market, there are a lot of struggling businesses that we’re seeing, especially in the SME space. A lot of them are seeking funds to get rid of a tax debt and not every financier will take that further risk on,” says Cribb.

Brokerages often have relatively low business costs, he says, but it’s broker’s private expenditure that “could get out of hand”.

“If someone has been very strong in the market in terms of the business they’ve been writing, and they’re seeing a drop off in the business that they can write, that will have an impact upon their future cash flow and that will then need re-evaluation on their part as to sustainability and cost structures, whether it be within the business or in their own private affairs.”

Cribb however emphasises that funding is still readily available for small businesses in Australia, provided they are sturdy and well-managed.

“Clearly the banks have reduced LVRs in some sectors, and that is a prudent approach by them, so if a business has certain classes of assets that are already falling incumbent or are incurring trading losses and they don’t have any other security to offer the financier, then there will be difficulty in getting finance.

“But the reality is there is no problem with getting money in Australia, provided of course the business that is seeking to be funded is a robust one.”

Despite these “pressure points”, which Cribb says were inevitable following the GFC, the Australian financial sector remains in good health compared to our US and UK counterparts.

In the latest RSM Bird Cameron survey of business birth and death rates, the Australian financial services sector saw a growth of 2.3 per cent, while the UK and US markets both fell by 1.3 and 1.4 per cent respectively.

“The financial sector in Australia is, and remained during the GFC, very robust. It’s well-known that we do have four of the top ten banks in the world in terms of their capitalisation, and that is reflective of a robust and strong financial market.”