(4 October 2017 – Australia) In a submission to the Productivity Commission, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell has hinted at the idea of a publicly backed bank to support lending to small businesses.
Carnell states that regulatory requirements are geared towards lenders focusing on mortgage-secured lending. She says that without property as security, lending to small businesses owners is “simply unavailable”.
Carnell highlights in the submission that one “option” may be to look at establishing a body that arranged government-supported loans, alongside closer scrutiny of banking regulations.
The submission says “an alternative option is for a government-backed approach to small business lending such as the Commonwealth Government Clean Energy Finance Corporation”.
“The fund was set up because of the barriers to entry into clean energy and the need for a bank-friendly business case in order to entice banks to lend in this area. Banks and the CEFC share the risk on these loans.
“It could be a useful model for government-backed small business loans, similar to the British Business Bank.”
A similar initiative is established in the United Kingdom, with the British Business Bank, which increased loans to small businesses following the global financial crisis. That bank does not provide direct loans, rather sources finance from more than 90 businesses, including online lenders.
In addition to a tax-payer funded bank, the submission said the Ombudsman explored obtaining small business funding from the A$2.3 trillion superannuation sector.
It recommended the Productivity Commission look at whether super funds were deterred from investing in local venture capital, which could act as a source of competition for banks in SME lending.
A submission by the Reserve Bank of Australia (RBA) found that major lenders controlled more than 80 percent of small business loans, compared with 77 percent of the housing loan market.
The RBA also noted that many small businesses had limited collateral for securing a loan aside from the family home, but that many banks had a “limited appetite” to lend to small businesses without sufficient equity or collateral.
“Without sufficient equity or collateral, many small businesses will receive only limited loan funding,” the RBA said.
A recent study from accounting consultancy firm, KPMG found that the online lending space in Australia increased from US$27 million (A$35.5 million) in 2015 to US$610 million in 2016 as Australians sought out peer-to-peer lending (P2P), balance sheet business lending and crowdfunding.