Cash-strapped, time-poor SME owners looking for funding alternatives
Small-business owners and start-ups are still finding it difficult to access finance to start or grow their businesses, according to the Reserve Bank of Australia’s (RBA) latest bulletin, Access to Small Business Finance, the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell said.
“The report highlights the absence of entrepreneurial finance, with lenders wanting real estate – normally the family home – as security, or alternative lenders offering short term, high cost capital,” Ms Carnell said.
“The report also provides information on initiatives that might improve access to finance for small businesses; a number of which are recommendations in our Affordable Capital for SME Growth inquiry report.”
In the report the ASBFEO recommended establishing a Business Growth Fund, focusing on long term funding solutions for SMEs that have the capability to grow. SMEs would be able to apply for between $250,000 and $5 million, with terms up to seven years, secured against the business. This approach was cited to have been effective internationally Ms Carnell believes it would be a game changer for Australia.
“Another of our recommendations, also referenced in the RBA’s report, is an Australian Government Guarantee scheme where member banks apply for a government guarantee to partially support a loan to SMEs with a strong business case, but insufficient real estate or business assets.
“There is a funding gap for small businesses seeking capital and there are significant barriers to accessing finance, all raised in the RBA report and our own. These issues stifle business growth, employment and investment,” Ms Carnell said.
“If the financial services sector would change the way it thinks and does business with SMEs, then businesses could seize new opportunities in markets and strengthen their competitive position, which would in turn have a considerable benefit for Australia’s economy.”