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Tyro Payments executive director Jost Stollmann believes the majors 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”.
Mr Stollmann’s comments follow the release of a government-commissioned inquiry report last Friday into bank lending which found the big four banks consistently engaged in practices that caused significant harm to some small business customers.
The Tyro executive said the large banks typically insist small business owners put their family home up as collateral for business loans, 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.”
The report, by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), revealed that banks consistently failed to implement changes to address persistent problems, despite repeated opportunities to do so over the past decade.
The ASBFEO inquiry – completed in some 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 GFC, there were 17 inquiries and reviews that had produced more than 40 recommendations relating to the small business sector.
The ASBFEO report made 15 recommendations – four to the federal government and 11 to the banking sector – to address the overall finding that the big four banks “consistently” engaged 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 its report.
ASBFEO Ombudsman Kate Carnell conducted hearings with the big four banks at the end of 2016 as part of her inquiry.
[Related: Mortgage exec joins Australia's newest bank]