In last November, the general council of the Australian Chamber of Commerce and Industry called on the Productivity Commission to carry out a study into the degree of competition in the provision of finance for SMEs claiming that small businesses are taking an unfair hit on restricted access to finance.
In December, the federal Liberal Opposition supported this move by also calling for an official inquiry into restrictions on business financing for SMEs – this time through the Senate.
Opposition spokesman, Bruce Billson, said that the limits of lending for SMEs have stopped them from growing. He said that the issues of finance debt and cashflow are the oxygen of small business survival and are key challenges that need to be investigated.
As both the Howard and Rudd governments have recognised, small businesses are the engine room of the Australian economy and, apart from governments, are the only businesses that are putting on staff.
But they need access to affordable credit for investment, working capital and to continue job creation.
ACCI’s CEO, Peter Anderson, said, after its meeting last November, that the general council was concerned at the low access to finance for SMEs and the growing relative cost for them when they can eventually attract business finance.
He said that being able to shed light on the reasons why there is a large gap between home mortgage rates and small business loan rates will be an important step towards achieving a fairer deal for SMEs.
The Reserve Bank dropped its cash interest rate by 425 basis points between August 2008 and May 2009 but small business loans had fallen only by around 230 points yet, in the recent RBA interest increases, the rate rises were fully passed on!
Bruce Billson said the same thing about the interest rates for small business loans and that an inquiry would uncover the major banks’ reasons for this.
VECCI has also lent its voice for an inquiry through its CEO, Wayne Kayler-Thomson. Wayne said than an investigation is timely particularly coming after a VECCI survey showing that thirty per cent of SMEs in Victoria said that the lack of capital was the key barrier to investment.
According to SmartCompany, Dun and Bradstreet’s director of corporate affairs, Damian Karmelich, agreed that an inquiry is a good move into discovering how small businesses are being restricted. He said that anything that can be done to better explore how small businesses can get access to finance will be a good thing because we are now in an environment where just not small business but everyone is being re-rated for risk and many of the issues are not unique to small business.
The Australian Bankers’ Association said that it will participate in any inquiry into discovering how small business lending was being restricted.
Both calls for an inquiry have garnered considerable support and the Federal Opposition will call for cross-party support for the Senate inquiry when parliament resumes this year.
The Geelong Chamber agrees that the inquiries are needed to identify why lending to small business is being restricted at a time when business growth is so essential for the economy.