Australian banks squander $60 billion lending opportunity
Australia’s major retail banks are squandering an opportunity to lend up to $60 billion to the country’s two million small and medium sized businesses because their loan conditions are too restrictive, Tyro Payments said today.
The comments follow the release of an Australian Government’s commissioned inquiry report last Friday into bank lending, which found the big four banks consistently engage in practices that cause significant harm to some small business customers.
Tyro Payments Executive Director Jost Stollmann said Australia’s large banks typically insisted that small business owners put their family home up as collateral for any business loan, rather than relying on the positive cash flow of the business.
“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,” Mr Stollmann said.
“This is impeding innovation and job creation, and reinforces the notion that Australia’s large banks in many cases are actually curtailing economic growth.
“We know that Australian SMEs want to borrow up to $60 billion a year more than they currently do to grow their businesses, hire new staff and innovate.”
Tyro research has also found that banking red tape is robbing more than 880,000 small and medium sized businesses of four weeks’ productive work time a year, costing the national economy almost $7 billion annually.
Mr Stollmann’s comments come as the Federal Government’s own commissioned inquiry, by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), found that banks have consistently failed to implement changes to address persistent problems, despite repeated opportunities to do so over the past decade.
The ASBFEO inquiry – completed in just over three months – investigated the circumstances surrounding a number of cases of alleged small business mistreatment by the banks, and concluded loan contracts between banks and small businesses, put the borrower at a distinct disadvantage.
It found that since the Global Financial Crisis of 2007, there have been 17 inquiries and reviews that had produced more than 40 recommendations relating to the small business sector.
The ASBFEO report makes 15 recommendations—four to the federal government and 11 to the banking sector—to address the overall finding that the big four banks “consistently” engage in practices that can significantly hurt some small operators.
ASBFEO will also publish six monthly scorecards on the progress banks are making in response to the recommendations contained in the ASBFEO report.
ASBFEO Ombudsman Kate Carnell conducted hearings with the big four banks at the end of 2016 as part of her inquiry.
As Australia’s only technology company with a bank license, Tyro recognises the restrictions of the big banks’ traditional lending model. Therefore it offers unsecured cash flow lending to small and medium sized businesses.