Business bank model urged for consideration

Speaking at the Franchise Accountants Network conference in Sydney, Ombudsman Kate Carnell said access to finance was a major challenge for Australian small-medium enterprises.

“Banks are happy to lend to small businesses, but only if they have security such as property or cash,” Ms Carnell said.

“I’m concerned about SME lending constraints due to prudential requirements implemented after the Global Financial Crisis.

“The requirement for property security limits capital availability for small businesses with good cash flow and good prospects. Funding for many small businesses is unavailable at a reasonable cost.

“I’ve asked the Productivity Commission to explore the extent to which prudential risk weighting standards and capital requirements have had unintended consequences on lending to small businesses.”

Ms Carnell said the option of a Government-backed approach to small business lending like the British Business Bank should be considered.

“Other countries have identified a similar problem and come up with solutions,” she said.

“The British Business Bank can provide a government-backed 75 per cent guarantee against the outstanding facility balance, potentially converting a ‘no’ credit decision from a lender to a ‘yes’.

“The British Business Bank can also help small finance providers to tap institutional investors’ funds.

“Without a creative approach to small business lending in Australia we risk stifling growth, investment and employment.”

www.asbfeo.gov.au

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