Small business raise big concerns over COVID-19 loan guarantee scheme

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New research reveals that four in five business owners (79 per cent) believe that banks will not be able to approve and settle loans under the Coronavirus SME Guarantee Scheme as quickly as they need it. However, the research also reveals that only one in three businesses believe that non-bank lenders will deliver much-need loans faster than the banks themselves.

The findings come from a survey of an independent panel of 207 business owners, commissioned by online lending platform lend.com.au, that sought to gauge business confidence about lenders approved to offer loians under the scheme.

The survey also found that 70 per cent of business respondents need the loans to survive. Among them, 12 per cent admitted the timing was already too late for their business, and 32 per cent need a loan by the first week of May.

The findings are a cause for concern as some banks are still yet to deliver the loans, despite the fact that the Coronavirus SME Guarantee Scheme was announced on 22 March. ANZ, Bankwest, Bendigo and Adelaide Bank, and Suncorp are still in the process of finalising their loan details.

The survey also revealed that confidence in non-bank lenders to deliver the loans is equally low, with just 34 per cent of business respondents believing the FinTech sector could approve and settle loans faster than the banks.

“There is currently the very real, and ongoing, issue of bottlenecks in loan approvals among the banks,” Bill Baker, CEO of Lend Capital, said. “However, the biggest problem for borrowers is beyond that. There is no way that any business will know which lender will approve them – borrower credit risk differs between lenders, and each bank and non-bank has its own lending criteria.

“Without knowing which lender’s criteria matches their credit profile, a business will go through the time-consuming process of making an application with one lender, waiting weeks in the queue for the result, and approach another if they are not approved,” Baker added. “They will be forced to continue shopping around between lenders in an effort to secure much-needed funding.

“Ultimately, there is a lot of confusion among borrowers. Finding the right lender with the right product is the longest part of the approval process. Once a lender matches the customer profile to its lending criteria, the process is very straightforward.”

Baker said that the only feasible solution in the current climate is a partnership between Government-approved lenders and AI-powered lending platforms that can match a borrower to a lender’s product in as little as 24 hours – in effect doing the”‘shopping around” for the borrower.

“Small-to-medium businesses are the backbone of the Australian economy and they need the money now,” Baler said. “For businesses in certain sectors, delays in these loans may render the Government’s JobKeeper wage subsidies ineffective for holding onto employees, as a large proportion need to cover other significant costs to remain operable over the coming weeks.”