Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell has used an Estimates hearing to once again call on the banks to implement the changes outlined in the ASBFEO bank loans inquiry report as quickly as possible, in order to establish balance in the relationship between financial lenders and their small-business customers.
“(there have been) 17 inquiries from various perspectives since the GFC; 40 recommendations that have been repeated in various forms over that period of time, and very, very little movement from the banks in a range of things from really important issues, down to things you would have thought the banks would have picked up on by now,” Carnell told the hearing.
“It shows the level of the lack of action by the banks on these things, that have been brought up time and time again,” she said.
When asked about the impact of current banking practices on the small businesses examined as part of the ASBFEO inquiry, Carnell said that many were now bankrupt.
“There are people who used to be running successful businesses living in garages; we got a pretty good view of what actually happened in a range of these cases and the impact is huge,” Carnell said.
“In a good number of the cases, these were people who hadn’t missed a payment on their loan; so they weren’t in financial default, the default came as a result of non-financial default.”
“The community believes – and small businesses believe – that if you pay the amount you’re supposed to pay every month and you don’t break any of the standard rules, that should be all you’re required to do, so for the banks to be able to default small businesses when people are compliant financially, we don’t think that’s a reasonable approach.”
“Remember small businesses don’t have in-house lawyers and have little-to-no capacity to negotiate these contracts, so we believe that getting rid of non-financial covenants for loans under $5 million is really important for small businesses to be able to get on with the job of growing their businesses.”
“We tried to come up with a group of recommendations that would make a difference to small business. We’ve tried hard to make them do-able and do-able quickly, because we haven’t come up with any hugely new recommendations.”
“I want them (the banks) to go with all of them,” she said.
Carnell also reinforced her commitment to providing six monthly updates on the banks’ progress in implementing the ASBFEO recommendations.
Inside Small Business
