Australian banks have a lot to learn about the current state of SME finance requirements after Minister Emerson’s small business access to credit during the global financial crisis roundtable last week.
The Australian Retailers Association (ARA) executive director Richard Evans said Australia’s big banks are disconnected from the small business market after clearly demonstrating they don’t believe there is an issue with small business access to credit.
“Clearly small business doesn’t appear on the banking sector’s economic data radar in any significant way – with banks stating 60 per cent of small businesses don’t borrow – indicating they are not close enough to the real small business market doing it tough right now.
“Small business owners, including mum and dad retailers, do borrow. They take out personal loans and they access second mortgages for their homes for their businesses to survive,” said Evans.
“Most commonly they use their personal credit cards to fund their day-to-day operations such as cash flow and small capital equipment purchases. However, only four per cent of retailers have been passed on credit card interest rate cuts.”
Australia’s big banks need to generate new low-rate credit cards and other lending products for small business; they have to work with industry associations to generate small business survival strategies and they need to begin to collect data about how small business operates and accesses funds.
Evans said reductions in credit card interest rates or new low interest credit card products may also address the current issue of consumer trepidation to inject funds back into the economy via the retail hub.
“For small retailers, the fact remains it is a difficult and costly processes to borrow from a banks who are lured by the obvious benefit of other lucrative markets and don’t understand the small business sector,” said Evans.