Banks ‘too cautious’ on SME loans: financial regulators

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The country’s top financial regulators are concerned banks are ‘too cautious’ when it comes to loans for small business borrowers.

The Council of Financial Regulators (CFR) – which is chaired by RBA governor Philip Lowe and includes APRA, ASIC and federal Treasury – met to discuss the tight credit conditions for small businesses and the associated reduced risk appetite from many lenders.

As a result, ASIC will soon officially confirm that the responsible lending laws don’t apply to small businesses.

In their post-meeting quarterly statement, the CFR stressed that the flow of credit is fundamentally important to the functioning of the Australian economy.

“(We) discussed the concern that lenders’ risk appetite for some types of lending may have swung too far towards caution,” the CFR said.

The CFR’s statement is in response to repeated complaints from bankers this year that tighter small business lending has been an unintended consequence of the Hayne royal commission.

Great, so what are they actually doing about it?

During the meeting, CFR members discussed that in the coming weeks ASIC will release updated guidance on responsible lending provisions.

“It will confirm that responsible lending requirements do not apply to loans made predominantly for business purposes, regardless of the type of security offered for the loan,” said the CFR statement (and yes, they even bolded the ‘do not’ bit!).

The guidance will also assist lenders to better understand their obligations and reduce the risk of non-compliance.

Great, but what can I do about it?

That’s the easy bit – get in touch with us.

The lending appetite in the SME space is something we’re well across and are more than happy to bring you up to speed on.

So drop us a line and we’ll be happy to run you through some of your business’s financing options.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

SMEs in financial trouble urged to seek a helping hand early

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Small business owners experiencing financial difficulties are often leaving it too late to seek help from a trusted adviser before going bust.

That’s one of the key factors contributing to small business insolvencies being explored by the Australian Small Business and Family Enterprise Ombudsman’s Insolvency Practices Inquiry.

Ombudsman Kate Carnell says it’s vital for small businesses to recognise the signs of financial distress and seek help as quickly as possible.

“We know this is an issue that is important to the small and family business community because there has been an overwhelming public response to our inquiry,” says Ms Carnell.

Lean on trusted advisers

Ms Carnell says it’s vital that small and family businesses lean on their trusted advisers when financial concerns arise.

“They don’t have to go it alone,” Ms Carnell says.

“The sooner small and family businesses get help, the more likely it is they can achieve a more favourable outcome.”

Have your say

Ms Carnell says the inquiry is keen to hear from anyone who has been through a restructure or insolvency to help inform their interim report, which will be released in December ahead of the final report in February.

She says the inquiry has already received 230 survey responses and 20 submissions, and expects that number to grow.

Stories can be shared by completing the inquiry’s online survey or by providing a submission via inquiries@asbfeo.gov.au.

In the meantime, if your business is going through a rocky financial patch and you’d like to explore your options, get in touch. We’re always happy to help out.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Govt moves to free-up lending for SMEs

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SMEs are set to have better access to finance, with the Australian government making two key moves this month to free-up lending to small business operators.

Firstly, Treasurer Josh Frydenberg says he will instruct the corporate watchdog ASIC to tell banks to waive responsible lending standards for small businesses.

Mr Frydenberg says while small businesses are exempt from responsible lending standards, many have been inadvertently caught in the tightening of those standards in the wake of the Hayne Royal Commission.

“There’s a real grey area as to what is a small business loan and a personal loan,” Mr Frydenberg told Fairfax.

“Small businesses are exempt from responsible lending standards; however, they are being inadvertently caught in the tightening of those standards post the Hayne royal commission as many use the family home to secure finance.”

Australian Business Growth Fund

Mr Frydenberg also recently released exposure draft legislation to allow the government to invest in an Australian Business Growth Fund (BGF).

The government is committing $100 million to establish the BGF and partnering with financial institutions to provide equity funding to SMEs.

The aim is for the fund to mature to $1 billion to help SMEs get access to the finance they need.

Why the need for the BGF?

Australia currently lacks a patient capital market for small and medium enterprises, the exposure draft’s explanatory materials states. Patient capital can provide entrepreneurs with the finance needed to expand without relinquishing control of their business.

“The government will help small businesses grow by co-investing with other financial institutions to establish a BGF that will provide equity finance to small businesses across a range of industries and locations,” the explanatory materials state.

Mr Frydenberg adds that many SMEs find it difficult to obtain finance other than on a secured basis – typically, against the family home.

They also find it difficult to access additional funding once they have pledged all of their real estate as collateral.

“With better access to more competitive finance, SME’s will be able to grow, fulfil their potential and continue to underpin Australian economic growth and employment,” Mr Frydenberg’s statement said.

Legislation to establish the BGF will be introduced to parliament before the end of 2019.

Does your business struggle to access finance?

If you’re a small business owner wanting access to finance, you don’t have to sit and wait for the government’s initiatives to take effect.

Instead, get in touch with us. We’re happy to talk through your current situation and help you explore your options.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Crunch time: tax debts can now be reported by ATO to credit agencies

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Got a large, overdue tax debt with the Australian Tax Office (ATO)? Then best listen up, because certain tax debt information can now be reported to credit reporting bureaus (CRBs).

A new Australian law means the ATO will be able to disclose the tax debt information of a business to CRBs when certain criteria are met.

What does that criteria include?

The ATO will only disclose tax debt information if the business meets all of the following criteria:

– it has an Australian business number (ABN), and is not an excluded entity

– it has one or more tax debts, of which more than $100,000 is overdue by more than 90 days

– it is not effectively engaging with the ATO to manage its tax debt, and

– the Inspector-General of Taxation is not considering an ongoing complaint about the proposed reporting of the entity’s tax debt information.

What’s the purpose of this law?

The ATO says the purpose of this law is to encourage businesses to engage with them to manage their tax debts and, where a business is unable to pay a tax debt in full by the due date, enter into a sustainable payment plan that’s agreed upon between the two parties.

The ATO adds that the law is also to support more informed decision making within the business community by making large overdue tax debts more visible.

Finally, the ATO says the law will reduce the unfair advantage obtained by businesses that do not pay their tax on time and do not engage with the ATO in managing their tax debts.

How much warning will I get?

The ATO will notify a business in writing if it meets the reporting criteria and give it 28 days to engage with the ATO and take action to avoid having its tax debt information reported.

This might apply to me – what are my options?

Get in touch with the ATO – you may be able to agree on a payment plan.

That said, not everyone enjoys the ATO hovering over their shoulder. If that includes you, it’s definitely worth also getting in touch with us to explore your options with business loan lenders.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

SMEs need more support from lenders to grow: RBA

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The ‘pendulum may have swung a bit too far’ when it comes to the tight lending standards currently imposed on small businesses, says the Reserve Bank of Australia (RBA).

Since the RBA cut the official cash rate to a new record low of 0.75% on Tuesday, most of the attention has been on whether the banks would pass the full 25 basis point cut to home loan customers (spoiler: the big four banks only passed on 0.13-0.15%).

As such, several pointed remarks made by RBA Governor Philip Lowe in regards to lenders’ “tight” lending standards imposed on SMEs have flown under the radar.

“In some areas the pendulum may have swung a bit too far,” Dr Lowe said at the Reserve Bank Board Dinner on Tuesday night.

“It is important that our financial institutions support small businesses in particular. Lenders should not be so scared of making a loan that goes bad that they don’t provide the credit that the economy needs.

“We will all be better off if businesses have the confidence to expand, invest, innovate and hire people.”

Many SMEs struggling

Dr Lowe’s comments come just weeks after a number of reports highlighted many small businesses were struggling due to financing complications.

One report, by market analysis firm East & Partners on behalf of Scottish Pacific, showed that more than one-in-five business owners said that being rejected from a lending product was the main reason for their cash flow issues.

Another report, by the Australian Banking Association (ABA), showed that while 9 million Australians have dreamed of starting their own business, 60% are held back from their dreams due to ‘access to money’.

‘RBA Governor’s advice should be heeded’

The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, has urged lenders to heed Dr Lowe’s advice.

“The overwhelming feedback to my office from the small business community is that a lack of access to funding is their biggest barrier to growth,” Ms Carnell said.

“If our financial institutions change the way they do business with SMEs, it might just give small businesses the confidence they need to grow, which would be of significant benefit to the Australian economy.

“It’s time we all sit up and listen to the RBA Governor.”

What next?

Let’s face it: sitting around waiting for everyone else to listen to the RBA Governor probably isn’t the most proactive business strategy if you’re in need of equipment or asset finance for your business.

So if you’re an SME owner looking to fund your business’s growth, then get in touch.

We’ve got a number of lenders on our panel and would be happy to run you through some options to help you grow your business.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.