New business registrations are actually up, despite COVID-19 lockdowns

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Despite fears the pandemic would lead to mass business failures, the number of Australians running businesses has actually shot up.

A trained architect, Julia Kay was earning enough to pay the bills but she felt like she was not getting ahead.

“I worked with a company for almost seven years, since I studied my masters,” she told the ABC’s PM program.

“I think over the course of my employment of seven years,  my pay rate went up about $10,000 from a student to pretty much running multi-million-dollar projects, which is pretty outrageous.”

So she threw caution to the wind and began her own business.

She created compostable cling wrap and pitched her product to the big supermarket chains.

She said they loved the idea and she is now speaking to private lenders who want to help her with manufacturing costs.

“It’s just been incredible, the uptake,” she said.

“In what seems like [a situation where] the economy should be burning, we’ve found quite the opposite.”

According to the Bureau of Statistics, the number of small businesses jumped by 15.2 per cent over the last financial year.

In the June quarter alone, the number of businesses rose by 1.4 per cent, with 34,000 created.

Small Business Council CEO Alexi Boyd said a driving factor was a deep urge by many to regain some control in their lives.

“People are saying: ‘Well I’ve got no opportunities here to see an increase in my wage if I’m working full-time for a large company but I can be more in control of what I can charge for my goods and services if I’m in my own business.'”

Ms Boyd said she was seeing a lot of IT professionals who had fast internet speeds setting up businesses at home.

“It’s a lucrative place to perhaps start a business because there’s a real shortage of skilled workers,” she said.

Decline in businesses winding up

While there’s been a wave of new start-ups, there’s also been a big drop in the number of businesses going to the wall.

The regulator, ASIC, said an average of 8,000 businesses wind up every year.

But last financial year that fell dramatically to just 4,200.

John Winter, chief executive of the Australian Restructuring, Insolvency and Turnaround Association — the professional body for those who help companies wind up — said you could be forgiven for thinking many businesses are in distress with lots of businesses shuttered up.

But he said most are still alive and registered thanks to state and federal government income supports.

“A lot of people have shuttered their business and are waiting to see what happens out the other side, so they haven’t taken the step of a formal insolvency.”

The government has offered further assistance.

It is providing a facility for the banks to offer interest-free temporary overdrafts for businesses, up to $15,000 for a maximum of 45 days.

And eligible small business customers with up to $3 million in debts will be able to defer loan repayments for three months on certain products.

Future for many businesses still uncertain

Mr Winter said while government help is welcome, in the long-term, small businesses need to build up as much cash as they can to stay strong.

“You’ve got to be able to make sure that your business is going to be able to keep turning over no matter what gets thrown at you over the course of the rest of this pandemic.

“You need to have rainy day money and that is the most challenging part of starting a business, because you haven’t built those reserves.

“But you do need to plan and make sure that you have some insulation to get you through the tough times.”

Ms Kay’s building up her cash reserves and trying to keep up with demand.

“I’m not held back by anyone’s expectations of me, which is incredible.”

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By David Taylor (Original ABC Article)