The Australian Small Business and Family Enterprise Ombudsman Kate Carnell has launched a new inquiry, exploring a range of international initiatives to address the funding gap for small-to-medium-sized enterprises (SMEs).
“The inquiry will examine Australian initiatives where the government shares the lending risk, and state/territory initiatives to support small business start-ups and growth,” Ms Carnell said.
“We will consult with Australian and international experts in SME lending and risk management, and liaise with Australian regulatory bodies.”
Ms Carnell said ASBFEO’s study last year, ‘Barriers to Investment’, reported that Australia’s 2.2 million SMEs rely on credit to start, operate and grow their business.
“Yet banks consider SMEs as high risk and offer lending with restrictive terms and conditions at a price few can afford, unless the SME owner has significant equity on property to secure against the loan,” she said.
“Our findings are in line with the Reserve Bank of Australia and the Financial System Inquiry 2014, which identified a funding gap, particularly for new small businesses.”
According to Ms Carnell, the draft report from the Productivity Commission’s inquiry into competition in the Australian financial system found that SMEs did not have access to the finance needed for growing their businesses.
“The need for equity in property coupled with a decline in the levels of home ownership, particularly in younger age groups, is resulting in the funding gap widening further,” she said.
“This new inquiry will make recommendations to allow SMEs that are trying to grow their businesses to have affordable access to the capital they need.”
The inquiry report will be released in July 2018.
