THE Australian Small Business and Family Enterprise Ombudsman Kate Carnell said an overhaul of lending laws proposed by the Federal Government would offer a necessary funding injection to the small business sector.
Under the plan announced today by Treasurer Josh Frydenberg, lending laws will be changed to lift onerous barriers to small businesses applying for loans.
“Access to finance is critical to small business survival, particularly as support measures are tapered over the coming months,” Ms Carnell said..
“The reforms outlined today would give small businesses the confidence they need to seek funding to get through this crisis, so they can grow and employ.
“Since the Banking Royal Commission, small businesses have faced an uphill battle to secure a loan, due to unrealistic serviceability requirements from the banks.
“The pendulum has swung too far and now is the time to correct this imbalance which is harmful to small businesses.
“Even in the best of times, many small businesses struggle to secure finance, with a recent Sensis report revealing that of the dwindling number of small businesses that applied for a loan in the three months to August, about one in four had been knocked back. There’s a good chance the onerous small business loan application and bank assessment process is partly to blame.
“We are aware of small businesses that have been asked for all sorts of documentation by the banks - even for loans that have been 50 percent guaranteed by the Federal Government – including director guarantees, which really means the family home. It’s no wonder small business owners are reluctant to borrow," Ms Carnell said.
“Importantly the banks will still be accountable to ASIC and the Government has pledged greater protections for vulnerable borrowers.
“ASIC will also have the power to impose penalties for prohibited or excessive fees and interest charges.
“Small business borrowers should always ensure their lender is an AFCA member and to go their trusted accredited financial adviser before taking out a loan.”