Australia’s major retail banks should be more flexible in lending to small and medium businesses, according to the Executive Director of a new Australian bank, Tyro Payments.
“In the 21st century, it’s 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,” Tyro Payments Executive Director Jost Stollmann said.
The comments followed the release this week of a Government-commissioned inquiry report into bank-lending practices.
The findings of the Australian Small Business and Family Enterprise Ombudsman’s (ASBFEO) inquiry into cases of alleged small-business mistreatment by the banks included 15 recommendations – four to the federal government and 11 to the banking sector.
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ASBFEO Ombudsman Kate Carnell conducted hearings with the big four banks at the end of last year as part of the inquiry, which concluded that loan-contract arrangements between banks and small businesses disadvantage borrowers.
Tyro also alleges that “banking red tape” is costing Australia’s estimated 880,000 small and medium-sized enterprises (SMEs) four weeks’ productive work time a year. According to its research, this amounts to a loss of almost $7 billion annually.
Tyro is the first new Australian bank to emerge in 18 years and provides unsecured cash-flow lending to SMEs.