Strict regulations mean Australia’s largest banks are now cutting themselves out of the country’s $60 billion small business market.
After the release of the Carnell Report
on small and medium enterprise (SME) lending, Tyro Payments executive director Jost Stollmann slammed the banks, saying their approach to collateral for business lending was stifling growth.
“We know that Australian SMEs want to borrow up to $60bn a year more than they currently do to grow their businesses, hire new staff and innovate,” he said.
“In the 21st century it is a ridiculous restriction that Australia’s big banks are insisting that any small business loan must typically be collateralised by property, rather than the cash flow of the business itself.”
Not only does this impede innovation and job creation but it also reinforces the notion that Australia’s banks are curtailing economic growth, he said.
Research done by ‘Australia’s newest bank’ found that red tape amongst the major banks was costing over 880,000 SMEs four weeks of productive work per year, draining approximately $7 billion annually from the national economy.
A better approach was needed, especially since new businesses today are less about physical assets and more about intellectual property, Stollmann told Australian Broker
“Lending has to be based on understanding the business and cash-flow. The banks have to get their head around that otherwise we cannot close the $60 billion in estimated shortfall in growth funding with all the negative consequences it has for Australia’s future prosperity. So far, the reliance on mortgages has been the easy way for them.”
Since brokers are likely to experience the shortfall in unsecured cash lending on a daily basis, he called on them to speak up and encourage the banks to resolve this shortfall.
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